Aircraft Carriers and UK Shipbuilding

Lord Arbuthnot of Edrom Excerpts

Wednesday 6th November 2013 Commons Chamber

[Mr Hammond]

I appreciate the hon. Gentleman’s measured tone and I join him in congratulating once again the work forces on the Clyde and in Portsmouth on the excellent naval vessels that have been built for the Royal Navy over the last few years, including the carrier that remains in build.

I know the hon. Gentleman is new to his post, but he is really going to have to check some of the history before he starts making sweeping statements. He tells me that when the carrier programme was announced, the cost was £3.6 billion. Almost as soon as it had been announced, the then Secretary of State announced a two-year delay, which the National Audit Office says drove a further £1.6 billion into the cost of the carrier. The largest single element of cost increase in this programme was a deliberate act by the then Labour Government to delay the project by two years.

The hon. Gentleman asks me when we first engaged with the Department for Business, Innovation and Skills about the challenges of maintaining a skilled work force. He suggests that that has happened only in the last few days. I can tell him that the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon), who is in his place on the Front Bench, sat down a year ago to discuss this subject and has been in discussions with the local authorities in the area for at least a year over how to deal with the challenges that these inevitable changes present.

The hon. Gentleman asked me about the union response. I look forward to seeing the union response in full. I understand that, so far, the unions at national level have been constructively engaged with what they understand is an effort to save the shipbuilding industry in the UK. They recognise that the level of employment in naval shipbuilding represented a surge around the carrier project that was never going to be sustainable in the long term. The challenge now is to protect the skills base as we downsize the industry.

The hon. Gentleman asks me about the £38 billion black hole. We could have a very long conversation about that, but put simply, it is the difference between the projected budget available and the commitments that the previous Government had announced. I have set that out in detail. Because the hon. Gentleman is new to his post, I would be happy to write to him and set it out again for his benefit. I would be happy to discuss it with him at any time in the future.

The hon. Gentleman asks about the consequences of the STOVL—short take-off and vertical landing—reversion. If we were to change the specification in the future, the MOD as the customer would, of course, have to accept the consequences, but we are confident that the design of the aircraft carriers is now mature. The mistake made in 2008—it was a small one—was that the contract was placed before the ship had been designed. Unfortunately—I kid my hon. Friends not—anybody who has ever tried to place a contract to build a house before the house has been designed will know that that is a licence to print money for the contractor.

The hon. Gentleman asks whether I can guarantee that there will be no further rises on the £6.2 billion price. Of course I cannot give him an absolute guarantee, but I can tell him that with every pound of additional cost being shared as 50p for the Government and 50p for the contractors, we will at least have the contractor’s serious attention to try to maintain control over the project—something that we did not have under the contract construct that the last Labour Government left us.

The hon. Gentleman asks how we have paid for the additional costs. If he had been paying attention to the statement, he would know that I told him that the full costs announced today were provided in the balanced budget equipment programme that I announced in May 2012.

Yes, the hon. Gentleman is absolutely right that we are acting as the Government of the United Kingdom in the best interests of the whole of the United Kingdom, looking at where best to deliver Britain’s warship building capability in the United Kingdom in order to make it sustainable and cost-effective in the future.

[Mr James Arbuthnot (North East Hampshire) (Con)]

My right hon. Friend has said that “with both carriers based in Portsmouth, the tonnage of naval vessels based in the port will be at its highest level since the early 1960s”, which is excellent news. Does that mean that the Government have reached the entirely sensible decision to bring both carriers into service?

[Mr Hammond]

As my right hon. Friend knows, that decision will be made in the strategic defence and security review 2015. Whether the decision is to bring the ship into service or to mothball it, it will be kept at Portsmouth.

Oral Answers to Questions

Lord Arbuthnot of Edrom Excerpts

Monday 4th November 2013 Commons Chamber

[Mr Francois]

Last week’s actions by the Guardia Civil were completely unacceptable. They were both unlawful and irresponsible, placing themselves and others in unnecessary danger. I can tell the House that we have made a formal protest to the Spanish Government, and ministerial colleagues in the Foreign Office will be raising this matter with their Spanish counterparts at the first opportunity.

[Mr James Arbuthnot (North East Hampshire) (Con)]

Given that we are a maritime nation, does my right hon. Friend agree that in the next defence and security review a maritime patrol aircraft should receive high priority?

[Mr Francois]

That will, indeed, be one of the issues we look at in some detail in the context of the next SDSR. As my right hon. Friend is the Chairman of the Select Committee on Defence, he will be well aware that there were serious problems with the previous programme, because it was way over budget and, unfortunately, technically did not ultimately work. Perhaps I may remind the House who was in government for most of the time that that programme was running; it was not us.

Oral Answers to Questions

Lord Arbuthnot of Edrom Excerpts

Monday 2nd September 2013 Commons Chamber

[Mr Hammond]

I can tell the right hon. Gentleman that the work on the review was conducted in-house, led by the Cabinet Office and supported by the Ministry of Defence, and that the principal cost involved will have been civil servants’ time. If he submits a written question to me, I will ask the Department to produce the best estimate that it can make of the time involved.

[Mr James Arbuthnot (North East Hampshire) (Con)]

Does my right hon. Friend agree that if we opted for an alternative to Trident, we should probably have to be out of the submarine building business altogether, and that that would pose a real risk to the national security of the country?

[Mr Hammond]

My right hon. Friend has made an extremely good point. It seems often to be forgotten by those who advocate an alternative that we must make a choice about whether to sustain a submarine building industry in the United Kingdom. I, for one, believe that it is essential to the UK’s strategic interest for us to maintain a submarine-building capability, and that further points to the use of a submarine-based continuous-at-sea deterrent.

Defence Reform Bill

Lord Arbuthnot of Edrom Excerpts

Tuesday 16th July 2013 Commons Chamber

[Mr Hammond]

My hon. Friend is absolutely right. The role of the Territorial Army has evolved and it will evolve further. My point was that when Haldane introduced it in 1908 by consolidating the county militias, he had in mind a home or territorial defence role, which the name reflects. I am happy to agree with my hon. Friend that the role that the TA has played over the years has been substantially greater than the role envisaged for it originally.

Hon. Members on both sides of the House have raised concerns over the possibility of employment discrimination against reservists. The Bill provides improved employment protection by allowing a right of access to the employment tribunal without a qualifying employment period for an unfair dismissal claim where the dismissal relates to the employee’s reserve service. Separately, there is already a criminal offence of dismissal because of call-out for reserve service.

However, we recognise that there is a perception among many reservists that they are disadvantaged in the workplace by their reserve service. We believe that the changes that we have set out in the White Paper will greatly improve relations between reservists and their employers, but we take the issue of discrimination against reservists very seriously. We have established a webpage through which reservists can report incidents of perceived discrimination and we will investigate them. If we find that there is a case for further action, we will take it. We will consider whether further measures may be taken in the next quinquennial Armed Forces Bill, which is due to be introduced in this House in 2015.

[Mr James Arbuthnot (North East Hampshire) (Con)]

I am delighted with what my right hon. Friend has just said. Will he consider, among the further measures that might be taken, action to help reservists who find that their promotion is held back by their being in the reserve forces?

[Mr Hammond]

I am grateful to my right hon. Friend. That example fits exactly into the category of discrimination in the workplace. We must look objectively at the examples that we are given to establish whether they constitute actual and systemic discrimination against reservists, rather than mere perceptions. The time scale that we have set out is appropriate. We have set up the webpage and are starting the process now. In 2015, when the next quinquennial Armed Forces Bill is introduced, the time will be right to analyse the information that we have received and to consider what action is appropriate.

The support of employers is crucial to delivering our future reserve forces, and we seek to strengthen the reservists and the MOD’s relationship with them. The White Paper set out a range of measures to deliver a sea change in those relationships. While small and medium-sized enterprises will benefit from all of the measures, I have acknowledged previously that reserve service can have a particular impact on them as a result of their scale. Therefore, by amending clause 44 of the Reserve Forces Act 1996 to allow the introduction of a financial award of £500 per month per reservist for SMEs when any of their reservist employees is mobilised, we will target additional resources at this sector and explicitly recognise the additional impact SMEs may have to absorb when a reservist employee is mobilised.

The measures in part 3 support the package of proposals set out in the White Paper. They will ensure that we have the well-trained, well-equipped and integrated reserve forces we need, which are able to deploy with their regular counterparts as part of Future Force 2020.

The driver for change running through the Bill is the requirement to deliver the capabilities our armed forces need while ensuring value for money for taxpayers, whether that is through better procurement or more efficient and effective use of the reserves. The measures contained within it allow fundamental change to how we procure our military equipment, and ensure that we will be able to make full use of our reserve forces in the future.

Whatever else we may disagree on, all of us in this House place the utmost importance on properly equipping and supporting our armed forces. The Bill will ensure that we can be confident of our ability to do so in the future. I hope the measures will command widespread support, and that we will be able to take them forward through this House and the other place on a consensual basis. I commend the Bill to the House.

[Mr Jim Murphy (East Renfrewshire) (Lab)]

Like the whole House, I listened intently to the Secretary of State’s necessarily detailed analysis of the specific points he announced in advocating the Bill. At the start of his speech he reflected on the tragedy in Brecon, and I associate the Opposition with his comments. After the controversy relating to today’s Health statement, I wish—I suspect to your satisfaction, Mr Deputy Speaker—to seek a more consensual approach to the tone of our debate. The principles driving the reforms in the Bill have the potential to unite all parts of the House.

Reform to defence procurement is vital to ensuring value for money, while upholding the highest possible standards and timely delivery of world-class equipment to our personnel. It is essential that increasing the number and enhancing the role of the reserve force be a success, in order to strengthen our front-line Army capability at a time when it has been subject to cutbacks. The Opposition’s aim is to ensure that these objectives are met through effective delivery, scrutinising the military as well as the financial implications of the Government’s proposals.

On Government-owned contractor-operated procurement, it is crucial that defence procurement practices be modernised to serve both the front-line overseas and the bottom line back home. Both parties agree that some of the issues that have plagued defence procurement have been insufficiently tackled by successive Administrations. In all Governments, momentum on modernisation has been lost. Major projects such as Eurofighter-Typhoon have grown greatly in cost and have been delivered years late. The roots of that lay in the late Baroness Thatcher’s Administration, showing just how far back some of these issues go.

Shared blame, however, is not as important as shared resolve, which is necessary to achieve meaningful reform. Such reform will come from greater professional project and programme management within Defence Equipment and Support, faster decision making, fuller accountability for outcomes, and longer-term integration of military expertise.

The Opposition are genuinely open-minded about the management structure that will deliver this change, which is why we accept the proposed legislation that will enable a GoCo model to be established. Supporting assessment of GoCo’s feasibility, however, is not the same as supporting its creation. The comparison between a GoCo and DE&S-plus, as it is inelegantly named, should, we believe, be based on the following principles.

First, reform must strengthen value for money within programmes, with industry adhering to targets on time and on cost. Secondly, the chosen procurement management model must retain parliamentary accountability for decision making—the point made by my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart)—so that oversight and scrutiny of multi-billion pound contracts is not hampered, but if possible enhanced. Thirdly, any change in management model must protect the rights of staff and engage with their trade union representatives, and finally, the procurement process should be characterised by talent and skill, with clear lines of responsibility, proper reward and career structures and a culture of consequences for those tasked with project management. Within that, military expertise has to be maximised without a single-service interest dominating decision making. The Opposition welcome a rigorous examination of all the options for achieving that and wish to see a genuine comparison made between the two options of GoCo and DE&S-plus.

[Mr Arbuthnot]

I am delighted with the right hon. Gentleman’s tone. I do not want to put words in his mouth, but can I take it that he has no objection, in principle, to a GoCo, but that he wishes to see how it works out in practice?

[Mr Murphy]

The right hon. Gentleman anticipates my point entirely. We wish to see reform. It is difficult to defend the status quo, which, despite the many efforts of the professionals involved, has ill suited successive Governments and has not delivered value for money. In addition to testing the logic of GoCo and DE&S-plus against the three principles I mentioned, we will consider the points the Defence Committee raised.

Further to the point made by the right hon. Gentleman, it is important that the comparison be genuine and be seen to be genuine. I say gently to the Secretary of State, however, that so far he has failed to guarantee that the Government will publish the findings of the two value-for-money studies. I hope they will take the opportunity, today or in Committee, to commit to doing so. It is essential that Parliament, industry and our armed forces have full confidence that affordability is a determining factor in this process, but that can be achieved only if we have public transparency in the findings prior to a final decision being made and Members being asked to vote in favour.

I hope, too, that we will receive reassurances about the role of Parliament and the National Audit Office in scrutinising the internal decision-making process of a GoCo. It is understood that the Secretary of State is ultimately accountable—to be fair, he said the same again today—but the decisions taken by the contractor in the handling of multi-billion pound projects should not be free from public oversight. It will also interest the House to know how reform will impact on one of the centrepieces of the 2011 Levene review, which was for service chiefs to

“take responsibility (and ultimately own the budget) for detailed capability planning”.

Any enhanced power for a contractor could contradict the increased control over budgetary management and planning given to the service chiefs.

--- Later in debate ---

[Mr James Arbuthnot (North East Hampshire) (Con)]

I echo what was said by my right hon. Friend the Secretary of State about the quality of our armed forces and the amount that we demand of them. We are putting them through a lot at the moment.

Once upon a time, before most Members were born, I was a Defence Procurement Minister, and I was delighted by the publication of the Bernard Gray report under the last Government. Sadly, the then Prime Minister tried to suppress it, although he should have recognised that it covered not just the period of a Labour Government, but the period during which I was in charge of defence procurement. The report revealed a great many failings in the procurement process. It showed, for instance, that the programme was overheated, that a weak interface between the MOD and DE&S was resulting in poor discipline and very little change control, and that there were insufficient skills in the DE&S. Subsequently, I was both delighted and highly amused when Bernard Gray was put in charge of sorting out the mess that he had identified.

The Bill was designed to achieve that. Like Gaul, it is divided into three parts—although, according to its drafting, there are four—dealing with defence procurement, single-source contracts and reserves. Each of those issues, but particularly procurement, raises a great many questions. I shall ask some of them now, because in the case of a change as fundamental as this, the devil is in the detail. The change is fundamental and it is being made against a background of fundamental change at the MOD as a result of the Levene reforms, severe reductions in funding and huge redundancies, not to mention the fighting in Afghanistan and the withdrawals from Afghanistan and Germany. As I have said, we are asking a lot of the Ministry of Defence, and it will need help to achieve the major changes set out in this Bill. It will need help from Parliament and from industry, and from academia and the country, and it should be willing to ask for and accept help, and everyone else should be willing to give it.

I shall start with the defence procurement process set out in the Bill. In December 2011 the Chief of Defence Matériel set out four options: first, the status quo; secondly, a trading fund; thirdly, an executive non-departmental public body with a private sector partner; and fourthly, the GoCo. We are now down to two options: a value-for-money comparison between the GoCo and what we hear is called DE&S-plus. Most unusually, there is no option to stay as we are. It is perhaps surprising that the MOD non-executive directors have not insisted on there being a stay-as-you-are option.

The GoCo option is reasonably clear, and I will come on to it in a moment, but DE&S-plus is not at all clear. The White Paper devotes a massive four lines to it and does not define it. In fact, so far as I understand it, DE&S-plus is designed to be unclear in order to be the basis for a negotiation between the MOD and the Treasury as to the freedoms the Treasury can offer. In other words, if DE&S-plus can pay more for its personnel and so attract much needed skills—more than current civil service terms and conditions allow for—the GoCo will become less attractive. But how, in practice, can the Treasury loosen the rules for the MOD without loosening those same rules for other Departments with similar problems? If the answer is that in practice it cannot, does that mean that in practice this decision has already been made—so it is GoCo or nothing, and there is no public sector comparator? Has my right hon. Friend the Secretary of State made up his mind? How will the private sector companies bidding for a GoCo be confident that their bids are being fairly compared with DE&S-plus, whatever that may be?

ADS, the organisation of defence companies, suggests that the proper metrics might be better value for money for the taxpayer; shorter and cheaper bidding processes; improved skills and expertise; and greater stability in the funding of the defence budget. That is a potential set of metrics, but what does my right hon. Friend say are the proper comparators, and how will he avoid this being a wholly subjective guess about future behaviour?

This brings me to the GoCo itself. I am not instinctively opposed to this idea—in fact, I am rather attracted by it—but the Defence Committee has asked lots of questions, some of which remain unanswered. No other country has gone down this route, so this is courageous, Minister. That does not mean it is wrong, but there are some questions. First, if a foreign company is the lead partner within a GoCo, how will the MOD deal with any conflicts of loyalty that arise? The Atomic Weapons Establishment does not create such conflicts and is not as widespread in its coverage. Secondly, there are concerns about the issue of intellectual property, as some of my colleagues have said. That is covered in the single sourcing part of the Bill, but it is not covered in the defence procurement part.

[Mrs Madeleine Moon (Bridgend) (Lab)]

I am not sure whether the right hon. Gentleman is about to mention how the GoCo will affect current alliances and agreements for joint contracting between the UK and our partners. I was in the USA last week for the NATO Parliamentary Assembly, and I spoke to many alliance partners in NATO and to Congress members in Washington. The best that they could say was that Britain was very brave, that they would like to see whether we succeeded and that they would leave us to get on with it. Concern was also expressed, however, about whether they would be willing to share confidential contracting and technological information. Does the right hon. Gentleman agree that that is a concern?

[Mr Arbuthnot]

As I have said before, the hon. Lady performs a valuable service on the Defence Select Committee. She has put her finger on an extremely important point, which was also raised by the Select Committee in our report on defence acquisition. She is right; this matter has to be covered. I asked my right hon. Friend the Secretary of State a question about how the United States and France were reacting to the proposal, and he was able to say that he had received a supportive letter from the United States that very morning. I also know that there is a working party in operation with the United States to try to ensure that any problems are ironed out. It is true that other countries think we are being very brave. If we are indeed being so courageous, and if this works, we may well forge the way for other countries to follow us. It may well be that whichever company succeeds with the GoCo in this country could find vast new opportunities opening up for it. For example, it could take over the defence procurement of the United States, which would make somebody extremely rich.

The next question, which has been raised by ADS and by the Federation of Small Businesses, relates to how the GoCo proposition would affect small and medium-sized enterprises. The FSB has said that it is broadly supportive of the Government’s proposal, as contained in the Bill, but that it is vital that the needs of SMEs be considered when the reforms are implemented. I echo that, and I am sure that my right hon. Friend the Secretary of State will do so as well.

The time line involved is ambitious. I understand that there is a suggestion that we might reach a final conclusion in April 2015. That must remind us all of another fixture in our diaries for May 2015—the general election. Surely the risk of this project running up against the next election is huge.

[Mr Philip Hammond]

Perhaps I can help my right hon. Friend. The expectation is that the competitive process will be completed by the spring of next year, with the contract award in the late summer and with the GoCo standing up, if that is the solution we choose, towards the end of next year or at the very beginning of 2015—around December or January.

--- Later in debate ---

[Mr Arbuthnot]

Oh, good. One problem is that the date for the invitations to negotiate has already slipped. That was meant to take place this month, but it is now taking place in August. Let us hope there is no further slippage. We have not heard that any is expected; let us just hope.

[Peter Luff]

My right hon. Friend is making an important point. I hope that when the Minister winds up the debate, he will provide some clarity about the invitations to negotiate. They must not be allowed to slip beyond August, as any further slippage would put at risk the rather challenging timetable that the Secretary of State has outlined.

[Mr Arbuthnot]

My hon. Friend, as a former Minister responsible for defence procurement, has a great deal of expertise. Despite the enormous qualities of his successor, I was very sad to see him leave his job. He has got this point absolutely right.

I am going to divide the final question on this defence procurement issue into three. We understand that the process of moving towards a GoCo, if a GoCo is accepted, will be taken in two stages, with perhaps one domain paving the way to be followed by the rest of defence procurement. My questions are: first, what will be included in the first domain? Secondly, how long will it take for the Government to work out whether it has succeeded, so that the remainder of defence procurement joins the first domain? Thirdly, how will anybody work out, within a period of less than 10 years—many of these defence contracts run for so long—whether this approach has succeeded? My suspicion is that the success of this entire process will be able to be judged only in about 2020. I wish it well and, as I said at the beginning, I am attracted to the idea.

On single-source contracts, the House will be relieved to hear that I have not got very much more to say. I am not sure why this matter requires legislation, because for many decades we have been spending 40% of the defence budget without legislation. It may be that there is a tearing and pressing need for legislation or that the setting up of the regulator is what requires legislation, but no doubt that can be explained. It is startling that the MOD will be able to challenge a contract price already agreed between the parties up to two years after the completion of that contract. I would have thought that would make it a bit difficult for industry to decide how to invest, but, again, no doubt the Minister will deal with that in his wind-up. Will these new rules apply to overseas contractors? Apparently they will not. Does that not create an incentive for UK defence contractors to move abroad? That would be a shame.

Part 3 of the Bill deals with the reserves—once again, I declare an interest because my daughter is one of them. I keep asking this, but I am told that repetition is no shame in a politician: what plan does the Prime Minister have to form an alliance with the Leader of the Opposition and to go out and make it absolutely plain that this reserve forces project must succeed, in the national interest. It must succeed because there is no plan B. Much of the plan has already been welcomed by industry. I think there is a greater job to be done by industry in saying that this must succeed in the national interest, and by the FSB, which, as I say, supports it. Some measures in the Bill—for example, the extra notice for the deployment of reservists—will certainly make things easier for employers. The £500 extra payment has been welcomed by the British Medical Association, as well as by the FSB and others. Perhaps there is more to be done in order to sell this, but the success of the entire process is essential. I welcome this Bill and this part of it as being in the national interest, and I hope that the Prime Minister will be able to get out there and say so himself.

Reserve Forces

Lord Arbuthnot of Edrom Excerpts

Wednesday 3rd July 2013 Commons Chamber

[Mr Hammond]

I was intending to open my remarks by apologising for the evident delay in distributing these summary sheets. The summary sheet I referred to relates to the basing and structure statement that has been made today as a written statement. However, I felt that Members would wish to have a summary of the most important element of that—the base closures—and it was my intention, Mr Speaker, with your permission to distribute that sheet as I sat down at the end of my statement, and I deeply regret that it was not available until just a few moments ago. I am also not aware that it has been distributed outside this House.

I am grateful to the right hon. Member for East Renfrewshire (Mr Murphy) for his broad support for these measures. We have discussed these issues before, and I know the Opposition wish these measures to succeed. It is our intention that the reserves, and, as the right hon. Gentleman said, civilian contractors, will play a crucial role in the delivery of Future Force 2020, and the integrated regular reserve whole force will be at the centre of that construct.

The right hon. Gentleman referred to “longer deployment periods”. It is not the intention to increase the maximum length of deployment period. That will remain as now, usually six months in an enduring operation, with a period of pre-deployment training to precede it.

The right hon. Gentleman asked about transparency and security, and mentioned specifically the context of Northern Ireland. This is a perfectly fair point. We want to be as transparent as possible with employers, and we want to recognise employers, but we also recognise that there will be both employers and reservists who for various reasons will be reluctant to be identified, and we will, of course, respect that as we deliver this agenda.

The right hon. Gentleman asked about small and medium-sized enterprises. We have today introduced a very significant bonus for SMEs, with a £500 per month per reservist cash bonus on top of the other allowances that are already available for SMEs when an employee reservist is called up for operations, but the right hon. Gentleman is absolutely right: on top of the cash inducement, flexibility is crucial to SMEs, and we will continue to exercise flexibility in dealing with requests for postponement.

The right hon. Gentleman asked about public sector employers. I absolutely agree that the public sector must lead the way. Central Government have already set out a very generous offer to reservist employees in excess of that which is statutorily available. We are challenging the wider public sector to match that, and the NHS is already a very considerable provider of reservists, but I should just clarify that public sector employers are not eligible for the financial inducements we have announced today, and, indeed, for the ones that were already available.

The right hon. Gentleman referred to the issue of discrimination at the point of hiring. As he knows, the consultation response identified that some 46% of reservists reported a perception of discrimination at some point either in the workplace or in applying for work. We have announced in the White Paper that we are today establishing a website at which reservists can report incidences of perceived discrimination, which we will then investigate. If we discover that there is a case for further action, we will take it, including considering the possibility of further measures in the next quinquennial armed forces Bill, which is due for introduction in 2015.

The right hon. Gentleman asked about the specific issue of the spare room subsidy as it affects members of the reserve forces. We have been clear about that. There is a section in the White Paper on benefits and related matters. If the situation is still not clear to him after he has looked at that, I will be very happy to clarify further, although the Department for Work and Pensions is, of course, the lead Department on this matter. I can say this to the right hon. Gentleman, however: where any adult member of the reserves is deployed on operations or pre-deployment training and is called up and as a consequence vacates a room in their parents’—or another person’s—house, that room will not be treated as unoccupied for the purposes of calculation of the spare room subsidy.

[Mr James Arbuthnot (North East Hampshire) (Con)]

I declare an interest in that my daughter is a member of the Territorial Army.

I know my right hon. Friend and the entire House will wish to pay tribute to my hon. Friend the Member for Canterbury (Mr Brazier) for what is by any standards an astonishing parliamentary achievement. Does my right hon. Friend agree that there is no plan B, and that it is absolutely essential that this reserves plan succeeds? Will he therefore persuade our right hon. Friend the Prime Minister to join forces with the Leader of the Opposition to make it absolutely plain to employers that the success of this strategy is vital in the national interest?

[Mr Hammond]

My right hon. Friend is, of course, absolutely right. The success of this strategy is vital in the national interest, and I very much welcome the fact that the Opposition have approached the matter in a bipartisan fashion, challenging and questioning us where appropriate, but supporting the basic principle of expanding the reserve forces. I would be very happy to suggest to my right hon. Friend the Prime Minister that he make a joint approach to employers with the Leader of the Opposition. I am sure both of them share the view that the support of the employer community is critical to the success of this project.

Oral Answers to Questions

Lord Arbuthnot of Edrom Excerpts

Monday 17th June 2013 Commons Chamber

[Mr Hammond]

The adequate resourcing of European NATO members’ defence budgets was raised, but—as I have already said in the House—we must also be realistic about the situation that most European countries are facing in their public finances. The more fruitful vein for the next few years will be to ensure that we get true deliverable military capability with the budgets that countries already spend.

[Mr James Arbuthnot (North East Hampshire) (Con)]

I know my right hon. Friend believes that NATO’s output is more important than the 2% target of defence spending, but does he accept that if we abandon that 2% target, we will reduce the pressure on improving the output from NATO?

Better Defence Acquisition

Lord Arbuthnot of Edrom Excerpts

Monday 10th June 2013 Commons Chamber

[Mr Hammond]

I am grateful to the right hon. Gentleman for his welcome of this announcement. Of course I completely accept that the Opposition’s willingness to look at the issues with an open mind is not the same as an uncritical endorsement of the GoCo concept, and just in case I did not make this clear in my opening remarks, we have not yet accepted the GoCo concept as the chosen outcome; we are conducting an assessment. However, I think we agree across the House—Opposition Members who have, in office, experienced the challenge of trying to make the defence budget add up will certainly agree—on the need for change. The intentions are very clear.

The process that we are talking about was kicked off by the Gray report, published in 2009. I note that the then Secretary of State has strongly endorsed the GoCo model, which he feels is the way forward. We are examining the case for GoCo against the baseline of DE&S+. We have two separate teams, working with Chinese walls between them, that are equally resourced. One is trying to build the maximum fully-public-sector case that it can, taking advantage of all freedoms and flexibilities available. The other is working with potential GoCo bidders to look at the value that they can deliver. At the end of the process, we will make a comparison.

The right hon. Gentleman talked about the cost drivers from past scope creep. One of the clear advantages of changing the way that DE&S works is creating a harder boundary between the customer and the company supplying the requirements, making it less easy for scope to creep without a proper change process and proper recognition of the costs involved. He asked me whether the baseline would be re-costed. We do not anticipate a re-costing of the programme baseline. If we go down the GoCo route, we will negotiate with GoCo bidders for an incentivised fee structure, based on the existing costed programme. He will know that an independent cost advisory service sits alongside DE&S, and will play a continuing role in independently assessing the costs of projects and the appropriate level of risk to be attached to them.

Unsurprisingly, the right hon. Gentleman asked me about staffing levels in a post-GoCo DE&S, if GoCo is the selected solution. The staffing transfer would be made under the TUPE regulations. We anticipate about 8,000 of DE&S’s projected 14,500 2015 staff numbers transferring to the new entity, with the remainder—in naval dockyards, logistics, communications, and information services—remaining in other parts of Government, or being outsourced.

There is no reason to suppose that the GoCo route is more likely to deliver further staffing reductions than any other route. Clearly, the new management team, whether it is a GoCo or DE&S+, will seek to run the business efficiently, and to use the freedoms and flexibilities available to it to deliver outputs as effectively as possible.

The right hon. Gentleman asked me about the ratio of military to civilian personnel in DE&S. At present about 25% of the personnel in DE&S are military. We expect the military role, which will be performed by secondees in the future, to focus on providing specifically military advice to the DE&S organisation, rather than filling line management and project management roles, so I do not expect the military proportion of staff to increase, and it may decrease under a future model.

The right hon. Gentleman asked me a question, the motivation for which I entirely understand, about senior officials. Nobody wants to see such exercises becoming a gilded exit route for senior officials, and I am pleased to be able to tell him that the Chief of Defence Matériel, the most senior official in DE&S, will transfer to the MOD side—the customer side—of the equation and will be responsible for designing and managing the customer side. I cannot, as the right hon. Gentleman knows, give him an absolute assurance that other officials in the Department, should they choose to leave the Department, would not at some point in the future be able to join a GoCo, but of course there are rules and restrictions in place—a Cabinet Office regime which has been reinforced following revelations in The Sunday Times last year—and we will make sure that nobody is able to abuse this process.

The right hon. Gentleman asked me whether the GoCo would cover the nuclear deterrent. It will certainly cover the procurement of Vanguard replacement submarines. The management of our nuclear warheads is carried out by the Atomic Weapons Establishment, itself already a GoCo. We have not yet finally decided whether the new GoCo, if there is one, will be responsible for managing the MOD’s relationship with AWE or whether that will be managed directly. That will be one of the issues dealt with in negotiation with potential GoCo bidders.

On timescale, I can tell the right hon. Gentleman that we expect to reach a decision in the summer of next year, with a view to the new arrangements, whether GoCo or DE&S, being stood up before the end of 2014.

Finally, I turn to the question of risk ownership. This is an important point which has been somewhat misunderstood by some commentators. Clearly, it would be very attractive to think that we could transfer the programme risk in the defence equipment programme—£160 billion of it—to somebody in the private sector, but the reality is that there is nobody who has a balance sheet big enough, probably anywhere in the world, and the taxpayer would not be prepared to accept the price for taking on that risk, so the risk ownership in the programme will remain with the Government and the taxpayer. What the private sector partner will be at risk for is his fee, which will be structured in such a way as to incentivise the delivery of the key performance indicators that will be agreed with the partner during the negotiation process. That will be designed to align the GoCo partner’s incentives with the interests and priorities of the Department. That is where a great deal of our time and energy is being invested at present.

[Mr James Arbuthnot (North East Hampshire) (Con)]

What discussions has my right hon. Friend had with key allies, notably the United States and France, about this proposal and what has been their response?

[Mr Hammond]

I thank my right hon. Friend for a very important question. We have had discussions with key allies, notably the United States and France. The United States, contrary to some media reporting, is relaxed about this process. It recognises that there will be some technical issues that we need to resolve, but I am glad to be able to tell him that the Chief of Defence Matériel received this morning, by coincidence, a letter from his counterpart, the Under-Secretary for defence procurement, in the Pentagon confirming that the United States is confident that it will be possible to make these arrangements work. We have set up a joint working group to work through the issues that will need to be addressed before a decision is made.

Oral Answers to Questions

Lord Arbuthnot of Edrom Excerpts

Monday 15th April 2013 Commons Chamber

[Mr Hammond]

I am not going to pre-empt the outcome of SR 13; nor am I going to conduct the spending review in public. My Department is engaged in analysis with the Treasury and the Cabinet Office, in search of genuine efficiency savings. Where we can find such savings, for example in the equipment support programme, the Ministry of Defence will willingly do its bit to contribute to fiscal consolidation. I will, as you would expect, Mr Speaker, argue vigorously for the resources that Defence needs to deliver Future Force 2020 in accordance with the strategic defence and security review 2010.

[Mr James Arbuthnot (North East Hampshire) (Con)]

A few weeks ago, the Prime Minister told the House that he continued to hold the “strong view” that the overall defence budget should rise in real terms from 2015 onwards. When will that prime ministerial wish become Government policy?

[Mr Hammond]

I can confidently predict that the Prime Minister will be involved and will be a key player in the end game of the SR 13 discussion.

Oral Answers to Questions

Lord Arbuthnot of Edrom Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Hammond]

The Prime Minister has made it clear that he stands by his view that the equipment plan budget needs to increase in real terms, and we have a pledge from Her Majesty’s Treasury that we may plan on the assumption of a 1% real-terms increase. Our planning assumption is flat real-terms growth for the remainder of the budget.

[Mr James Arbuthnot (North East Hampshire) (Con)]

I do not think that that was precisely what the Prime Minister said. Nevertheless, does my right hon. Friend the Secretary of State agree that if we possibly can we should continue to meet the NATO objective of spending at least 2% of our gross domestic product on defence?

[Mr Hammond]

I agree with my right hon. Friend. The plans that we have set out do indeed show that we will continue to comply with that 2% threshold.

Maritime Surveillance

Lord Arbuthnot of Edrom Excerpts

Thursday 7th February 2013 Westminster Hall

[Mr James Arbuthnot (North East Hampshire) (Con)]

We are an island. That makes what happens around our coasts of great importance to us. We are a member of the permanent five in the UN Security Council, of the Commonwealth, of the European Union, of NATO and of other organisations, which, added together, means that we are a world power, with global responsibilities and interests. That makes what happens in the seas of the world of great importance to us.

We are a trading nation. We are a nation that cannot, or at any rate does not, feed itself. We rely on food, as well as countless other goods, from abroad. Most of that comes by sea. That makes what happens at sea of great importance to us. We operate under the conditions of “just in time”. Those wonderful warehouses in London’s docklands have now been turned into rather chi-chi flats, and we no longer have the reserves to feed, fuel or supply the country for many weeks, let alone months. That makes us vulnerable.

It is because of all the crucial interests that I have outlined that the defence of our country is of such importance. Within that defence, maritime surveillance plays a central role. Therefore, the Defence Committee decided to conduct an inquiry into it. We called the inquiry “Future Maritime Surveillance”, because we wanted to focus not on the decision to cancel the Nimrod MRA4 programme, the successor to the MR2, in the strategic defence and security review, but on the future needs of the nation and how, given where we are now, we could address those needs. Obviously, however, the cancellation of Nimrod was a big matter, and I shall consider that first.

Let us be clear about Nimrod. It was late—very, very late. It was vastly over budget, at a time of deep financial stringency. It was an aeroplane that had serious aerodynamic problems. It was, in other words, a deeply troubled project—and no doubt one for which, in the usual way, I should take the blame as Minister for Defence Procurement between 1995 and 1997.

[The Minister for the Armed Forces (Mr Andrew Robathan)]

Quite right!

[Mr Arbuthnot]

No, that was a joke—at least, I think it was. But the cancellation of the project was the one change that troubled the Ministry of Defence most in the SDSR. The Vice-Chief of the Defence Staff told the Defence Committee:

“It would be fair to say that among the Chiefs of Staff and in the military advice, it was one of the most difficult decisions to come to terms with, because it has multiple uses.”

In the Government’s answer to the concerns that the Defence Committee expressed in our report on the SDSR of August 2011, they said:

“Like the Committee we regret that we had to cancel the Nimrod MRA4 programme. It was a capability that we would, in an ideal world, have preferred to acquire…we reluctantly concluded that cancellation was the least bad option.”

The reason for that unhappiness was described to us by Professor Julian Lindley-French. He told us that

“the point is that of the seven military tasks in the SDSR, the MRA4 could have played a very important role in all of them. It was the loss of the enablers, because the single services were forced back to defend their own core competencies by the process, which for me was the biggest failing of the SDSR process. Forget all the strategic stuff: there was a haggle at that last weekend, which was utterly unacceptable in terms of the national strategic requirements.”

The report that the Defence Committee produced earlier this week on defence acquisition contains a bit of an echo of that statement.

In our report on the strategic defence and security review, we expressed concern about the resultant capability gaps of cancelling MRA4. In their response, the Government acknowledged that there is currently no single asset or collection of assets that could fully mitigate the resultant capability gap. That is enough about Nimrod; let us look at the other assets and look to the future.

The Government said in 2011 that they continued

“to maximise the use of…assets”—

other than Nimrod—

“such as Type 23 Frigates, Merlin Helicopters, Sentry and C-130 to contribute to Anti-Submarine Warfare, Search and Rescue and Maritime Counter-Terrorism where possible. In the longer term, if the Government were to conclude that it needed to close the gaps completely because”

threats emerged that could no longer be managed in the same way as today,

“some additional funding or reprioritisation would be required.”

In our report, “Future Maritime Surveillance”, we concentrated on the strategic requirements for maritime surveillance, identifying current capability gaps and the future requirements for maritime surveillance and how they might be met. Given the wide range of maritime surveillance tasks and the number of Departments and agencies that require access to maritime surveillance capabilities, we also looked at cross-Government co-operation. We published our report in September 2012 and the Government’s response in December 2012. We have also placed on our website the Minister’s response to some follow-up issues that we raised following the Government’s response. I am grateful to him for that.

I pay tribute to the Committee’s staff and military advisers, who provide us with invaluable support and advice. We are all grateful to them. I would like to thank personally the Committee members themselves. They work extremely hard to very good effect, which is one of the reasons why chairing it is the best job that I have ever had.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

I thank the right hon. Gentleman for giving way and I apologise for being slightly late. May I point out that the reason why it is such a good Committee is that its Chairman is so excellent?

[Mr Arbuthnot]

The hon. Gentleman might say that, but as a former Chief Whip, I couldn’t possibly comment.

The threats that require maritime surveillance are evolving and have become more non-military in nature. The Mumbai terrorist attacks in 2008 rather illustrate that, in that they were launched from the sea. Our report concluded that it was a weakness that there was not a single individual within the Ministry of Defence who should be responsible for maritime surveillance. The Government did not agree.

We acknowledged that the new joint forces command could have a role in delivering, co-ordinating and strengthening maritime surveillance. We are nevertheless disappointed that the Government do not think that there is a requirement for an individual within the MOD to take responsibility for maritime surveillance. We accept that it is not the JFC’s role, but we are concerned that the left hand of the MOD may not know what its right hand is doing, let alone be able to co-ordinate the interests of the MOD with all the other Departments and agencies that require maritime surveillance capabilities.

Here I begin a number of requests to the Minister for information, which I will be grateful if he responds to, if not in today’s debate, perhaps in writing later, with whatever degree of classification he considers necessary. It will be helpful if he first outlines how the co-ordination that we are concerned about is being taken forward, particularly as the MOD starts work on the 2015 SDSR. Our concerns were highlighted when we were told that there was an “informal group of Ministers” who were responsible for taking forward maritime surveillance issues.

Although decisions may ultimately be taken in Cabinet or the National Security Council, we thought there should be greater ministerial involvement. This contains an echo of our report, “Defence and Cyber-Security”, published in January this year and our report, “Developing Threats: Electro-Magnetic Pulses”, published in February last year: we worry that Ministers faced with a threat or a vulnerability that crosses departmental responsibilities have inadequate structures and insufficient practice in getting together to work out responses, which may be needed very quickly indeed.

Against that, we welcome the establishment of the maritime security oversight group and the National Maritime Information Centre. The Government told us that the risk assessment was expected to be completed in December 2012. Will the Minister update us on progress? What threats, including new ones, have been identified? Such strategic analysis is important. Future threats are increasingly likely to be identified through intelligence gathering.

Maritime ISTAR—forgive the acronym, which stands for intelligence, surveillance, target acquisition and reconnaissance—of which maritime surveillance is a part, will be essential. Without effective surveillance, both maritime and elsewhere, the UK armed forces are operating at a much reduced effectiveness.

[Sir Bob Russell (Colchester) (LD)]

As the Chair knows, we are holding an inquiry into the consequences to the UK of an independent Scotland. How would Scotland becoming an independent state impact on future maritime surveillance for England, Wales and Northern Ireland?

[Mr Arbuthnot]

Maritime surveillance is carried out at the moment in a nationwide fashion. To my mind, it is difficult to see how smaller units or entities could have a separate capability not backed up by MOD resources. We as a Committee have not reached that conclusion however, as my hon. Friend knows, because we have not yet concluded our inquiry into the defence consequences of an independent Scotland. When making their decision on independence, the Scottish people will need to take that issue very seriously into account. I am grateful to my hon. Friend for raising that important point.

The 2010 SDSR gave a commitment to enhancing ISTAR. In reply to the debate or later, will the Minister say what progress has been made in taking forward the development and strengthening of maritime ISTAR? What actual measures can he tell us about? What risk are the Government taking in delivering maritime ISTAR for the future?

Our report also looked at the future of maritime surveillance capabilities and what was required. We thought, frankly, that the MOD was sending out mixed messages. On the one hand, its studies identified a maritime patrol aircraft as the solution in the short to medium term, but on the other hand, a maritime patrol aircraft is not in the equipment programme. The MOD seems prepared to wait until the 2015 SDSR before making any decisions or assessing options. It seems to regard the risk as tolerable, on the basis that such equipment could be bought with unprecedented speed and efficiency. I have high hopes for the MOD’s acquisition process being reformed dramatically, but that might be the triumph of hope over experience.

[Penny Mordaunt (Portsmouth North) (Con)]

Does my right hon. Friend acknowledge that the report found that, though we had concerns over the situation in the short to medium term, the MOD has begun to explore options for future maritime surveillance in the much longer term, looking at unmanned systems and space technology in particular?

[Mr Arbuthnot]

I do acknowledge that. My hon. Friend, whose membership of the Select Committee is extremely helpful, anticipates a point that I was about to come on to—as I would expect her to.

Situations change rapidly: we have been deployed in Libya, and we are now involved in Mali. The question is whether the Ministry of Defence could rapidly regenerate a maritime surveillance requirement. Will the Minister set out what general contingencies are in place to deal with the unexpected? The problem is that he probably cannot, because they are unexpected, but we nevertheless need to have a general ability to deal with contingencies.

We also highlighted the potential for further capability gaps to emerge in maritime surveillance. For example, the Sea King will be taken out of service in 2016, to be replaced by Project Crowsnest, operating from Merlin mark 2 helicopters. The Minister has now confirmed that there will be a capability gap, as Crowsnest is not coming into service until 2020 and existing assets will be required to cover the gap. Will he tell us why that gap has occurred, and why it was not better anticipated?

In the longer term, as my hon. Friend the Member for Portsmouth North (Penny Mordaunt) rightly points out, the Government have committed themselves to exploring all the alternatives for maritime surveillance provision, including unmanned aerial vehicles and hybrid air vehicles. We commend them on that approach and the work that they have already undertaken to facilitate it.

We are grateful to the Government for their commitment to keeping us updated on the issues and to including wider cross-Government issues in such updates. We look forward to the first update in summer 2013, and to the second in summer 2014. We expect the updates to be as full as possible and in a form that we can share as widely as possible. An important part of the work on future maritime surveillance will be specific work in the run-up to the next SDSR. Some might say that that will be the most important part of the next defence review.

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

I, too, welcome the opportunity to take part in this debate. As our Chairman, the right hon. Member for North East Hampshire (Mr Arbuthnot) said, a great deal of hard work went into the production of the report. I add my thanks to the Clerks and special advisers to the Committee. The report makes a very positive contribution to the debate on the future of maritime surveillance.

As the Chairman also said, the Committee has previously expressed serious concerns about the decision in the 2010 strategic defence and security review to cancel the Nimrod MRA4 programme. Despite all the associated problems that the Chairman rightly mentioned, its cancellation involved a vast waste of public money; even so, as he also said, the MOD described that as the least worst option—I dread to think what the other options would have been. The cancellation has been analysed and re-analysed by the Public Accounts Committee and others, and in any case it is a fait accompli, so instead of dwelling on that, it seemed logical for the Committee to concentrate on its consequences, and those of other decisions in the SDSR, for maritime surveillance now and in the future.

[Mr Graham Brady in the Chair]

Given that the protection of the nuclear deterrent would have been one of Nimrod’s primary roles, one main concern about the cancellation is the capability gap in deterrent protection that might arise. I for one—I may be the only one here—would like the nuclear deterrent to be cancelled altogether. However, the former Defence Secretary Lord Browne has called into question the like-for-like renewal of Trident, suggesting that people who support it

“want to pour limited national resources into an increasingly ineffective nuclear system while being unwilling either to call for higher defence spending to meet conventional shortfalls or to scale back the UK’s level of international ambition. They want a gold-standard nuclear deterrent while under-investing in everything else.”

We all know that many within the military share that perspective. At the very least, that is worth considering and, for example, it would free resources to fill the capability gap in maritime surveillance in relation to new threats.

We do not have the luxury of a crystal ball and must look at circumstances as they are. We know that it is almost universally accepted, including by the MOD, that a replacement maritime patrol aircraft programme would, along with other assets, afford the optimum capability for the next 20 years, but that will not be seriously considered until at least 2015. Will the Minister update us on that situation, because that seems an awful long time?

I want to concentrate on the capability gap as it affects the nuclear deterrent. To understand the implications of cancelling the Nimrod programme, it is useful to look at the wider assets that, historically, have been involved in the protection of the nuclear deterrent. For understandable reasons, the MOD is cautious about providing too much information about that. In 2007, the hon. Member for North Devon (Sir Nick Harvey) received an answer to his parliamentary question on the conventional forces that had either a committed or a contingent role in the protection of the nuclear deterrent which stated:

“In addition to the four Vanguard-class submarines, all of which are dedicated to Military Task 1.2—Nuclear Deterrence—the current planned force elements assigned to support nuclear deterrence are”—

in a primary role, one mine warfare vessel and one survey vessel and, as contingent, two attack submarines, one destroyer, three mine warfare vessels, one Royal Fleet Auxiliary vessel, five Merlin helicopters and eight maritime reconnaissance aircraft. The broad order estimate of the costs was £25 million to £30 million for committed and about £250 million to £300 million for contingent for a range of tasks, including

“in support of the deterrent.”—[Official Report, 8 March 2007; Vol. 457, c. 2130-31W.]

In evidence to our Committee in November 2010, General Sir David Richards also made the point that maritime surveillance aircraft provide one of five layers of defence for the SSBN fleet, although he would not go into detail about those layers of activity, again for understandable reasons.

The fact remains that a gap in capability in the protection of the deterrent exists, and we need answers about what is to be done to fill the gap in the medium to long term. The Royal Navy SDSR question and answer document states:

“The NSC judge that there is a sufficient balance of capabilities within the SSBN, SSN, Frigate, RW”—

rotary wing—

“and MCM fleets to maintain the required level of assurance for CASD”—

continuous at-sea deterrence, and that the—

“decision to delete MRA 4 was made after carefully considering the risks associated with this.”

In written evidence to the Committee in 2012, the MOD specifically flagged up the following assets as playing a role in the protection of the nuclear deterrent: the SSN fleet—Trafalgar and Astute class—although the MOD highlighted that the primary role of the SSN is anti-submarine and anti-surface warfare, including protection of the deterrent; and the Merlin HM mark 1 helicopter, which, the MOD noted,

“has evolved organic Anti Submarine Surveillance to a Maritime Patrol Helicopter multirole capability deployed globally and in support of the strategic deterrent.”

The MOD also informed our Committee that several international agreements allow allies to contribute directly to UK surveillance tasks in support of deterrent protection.

Of the list of assets alluded to in the SDSR, the Merlin HM mark 1 is the only asset whose primary role involves maritime surveillance. There are 40 Merlin helicopters in service with the Fleet Air Arm, in both training and front-line squadrons. All four squadrons are based at Royal Naval Air Station Culdrose in Cornwall. The helicopters have a range of 450 miles, and I understand that they are being upgraded to mark 2 and will enter service as such this year. Will the Minister confirm that?

With the indulgence of the House, Mr Brady, I will raise a local issue. The HMS Gannet search and rescue service at Prestwick airport will close in the next few years. It straddles my constituency and that of my hon. Friend the Member for Central Ayrshire (Mr Donohoe). The airport is extremely important to our local area, and indeed to Scotland. It is suffering at the moment as a result of a number of factors, including the air passenger duty, and it is up for sale.

It seems daft on the surface that the Merlin helicopters, which protect the deterrent, are based hundreds of miles away in Cornwall when there is a site available on Faslane’s doorstep that has been used by helicopters for years. I urge the Minister to consider that matter, which may be small-scale in the grand scheme of things, but it is important to us locally, and I do not think that any Member will fault me for raising it.

To get back to the capability gap, several commentators gave evidence to the Committee, outlining their concerns about the potential shortcomings of helicopter maritime surveillance as a replacement for maritime patrol aircraft. The Coastal Command and Maritime Air Association said:

“The absence of the MPA together with a shortage of Towed Array fitted escorts, and the possible re-tasking of SSNs to land-strike targets (Tomahawk), results in a much reduced ASW capability. The helicopter is an effective ASW platform when operating relatively close to their base or battleship, but inevitably it has limited range and acoustic processing capability as well as restricted weapon-carrying capacity. Modern underwater detection systems using arrays fixed to the ocean bed and towed arrays on surface vessels—if one of those relatively few assets is available—can produce impressive results, but bad weather and noisy environments, both in the open sea and particularly at choke points, can totally disable these systems.”

Air Vice-Marshal A. L. Roberts, who is retired, also commented that

“while helicopter surveillance, in lieu of that by MPA, in support of the deterrent is entirely practicable in the approaches to Faslane, the range of the helicopter, if it is to remain on station for long, is limited. Adequate cover for the deterrent therefore becomes more difficult further out along transit routes and may be impracticable in SSBN patrol areas. The amount of noise generated in the water by a helicopter, which can be counter detected by any opposing submarine, is also a significant operational limitation.”

In March 2011, an article in Defence Management said:

“Mitigating the lack of Nimrods when it comes to clearing a path for Trident will be very asset-intensive in terms of Merlin ASW and towed-array frigates. But it is manageable. Just don’t expect those helicopters or frigates to be doing every task around the world that they currently undertake”.

My hon. Friend the Member for Bridgend (Mrs Moon) raised the matter in a debate in the Chamber on 26 January 2012. She is not here today because she has a constituency engagement. I am sorry about that because she really concentrates on this issue and is something of an expert on it.

[Mr Arbuthnot]

I entirely confirm what the hon. Lady has just said. The hon. Member for Bridgend (Mrs Moon) was the first to demand this inquiry, and has led it throughout. We are grateful to her for her commitment, even though she is not here today.

[Sandra Osborne]

That is entirely true. In the debate in the main Chamber, my hon. Friend referred to a letter that the right hon. Member for North Somerset (Dr Fox) sent to the Prime Minister in which he said:

“Deletion of the Nimrod MR4 will limit our ability to deploy maritime forces rapidly into high-threat areas, increase the risk to the Deterrent, compromise maritime CT (counter terrorism), remove long range search and rescue, and delete one element of our Falklands reinforcement plan.”—[Official Report, 26 January 2012; Vol. 539, c. 466.]

Will the Minister tell us the state of play of these matters as they stand today?

My hon. Friend also referred to an article in The Scotsman, which said that a Type 42 destroyer had to be detached from Portsmouth when a Russian navy battle group appeared off the coast of Scotland. A number of Russian submarines have also made a similar appearance. Previously, we would have swiftly and discreetly despatched a Nimrod to keep an eye on the situation, but, on this occasion, we sent out a Type 42 destroyer. Clearly, that illustrates a problem; we do not know what is going on in such areas without a maritime patrol aircraft.

It is also the case that the north of Scotland, which is referred to as the “high north”—that is not something that I can identify with, as I refer to it as the highlands and islands—needs close attention as it is an area of strategic and economic importance in a fast-changing environment. I hope that the fast change does not include Scotland becoming a separate country from the UK as opposed to being the north of the UK, but I will not go down that road now. The Chairman of the Select Committee has already stated that we are in the throes of an inquiry into the defence implications of an independent Scotland.

I welcome the Minister’s input into these matters, which have been brought to the Committee’s attention by people who are astronomically more expert than I am, and I look forward to his response.

--- Later in debate ---

[Bob Stewart]

I thank my hon. Friend. I certainly do agree. It is good that we have those bodies, and I may speak about that a little at the end.

SDSR 2010 got rid of a number of frigates, including Type 22s and Type 23s, as well as their on-board helicopters. That has further reduced our maritime reach and capabilities. The good thing about such Royal Navy vessels is that they can travel great distances, remain at sea for considerable periods and, crucially, demonstrate intent and presence when that is needed, as part of a combined taskforce or individually.

Collectively, members of the Defence Committee are concerned about the loss of our sovereign long-range maritime surveillance capability. They are also concerned about the United Kingdom’s current dependency on its allies for operations out into the Atlantic and in terms of our wider military defence capability.

The Committee was advised that the anti-submarine warfare capability gap that resulted from the loss of the Nimrod MRA4 is covered by a mix of helicopters, ships at sea and support by our allies. I do not buy that argument. The external situation has not changed. Indeed, with a resurgent Russia and the proliferation of smaller submarines in many areas of the world, it has arguably got worse. To counter such threats, the UK has reduced its capability and capacity by removing maritime patrol aircraft completely, as well as by removing appropriate frigates and destroyers, including their organic helicopters.

As has been mentioned, the Ministry is considering a number of future options. In particular, a decision on maritime patrol aircraft may be considered as part of SDSR 2015. However, such a decision would result in delivery of the new operational capability closer to the 2020 time scale. I would prefer us not to wait until 2015 to make such a decision. I would like it to be considered as soon as possible.

[Mr Arbuthnot]

Will my hon. Friend give way?

[Bob Stewart]

To my Chairman? With the greatest of pleasure.

[Mr Arbuthnot]

Mr Brady, you are our Chairman, of course.

[Bob Stewart]

Forgive me, Mr Brady. Two Chairmen in one—I’ll buy it.

[Mr Arbuthnot]

My hon. Friend danced lightly over the possibility of regenerating the capacity and the skills to fly these aircraft. Such skills are difficult to maintain, let alone to regenerate. Is he coming to that important point, which needs to be covered?

[Bob Stewart]

I thank my other Chairman. The answer is that I was not, but I am glad that he has raised the matter. We also highlighted the difficulty of keeping these skills alive, and no one has mentioned it. Perhaps the Minister will tell us—you will, won’t you, Minister?

--- Later in debate ---

[Thomas Docherty]

As I said, I know that my hon. Friend played no part in the decision to proceed. I cannot quite remember who was the Minister responsible for acquisition in the previous Conservative Government, but perhaps it will come back to me later in the debate.

Not just Ministers need to take some responsibility for mistakes; Ministry of Defence officials and the Royal Air Force need to take some, too. There was an 86% change in the aircraft specification from the time of commissioning under that previous Minister and October 2010. Mr Brady, you worked in industry prior to coming to the House. You know that making that amount of change to a project means that costs will go up and it will be delayed.

[Mr Arbuthnot]

Does 86% of the blame therefore need to lie with the Labour Government?

[Thomas Docherty]

I am sure that a previous Minister with responsibility for defence acquisition would always be happy to take responsibility for all the decisions that he made, even if he was not always fully aware of that at the time.

As our report on acquisition makes clear, the MOD must learn the lessons of past acquisition decisions. I think that I speak for the whole Committee when I say that, although we welcome the Government’s progress on acquisition, we are not convinced that they have learned all the lessons yet. There is still more work to be done. Perhaps the Minister will say more about what improvements can be made, in the light of those lessons.

The third responsible party is BAE Systems. It should not sit around and blame the MOD, the RAF and the two Governments, and try to get by without accepting some responsibility for its decisions. The Minister nods, and I welcome the fact that there is acceptance on both sides of the Chamber that BAE was not an exemplar: in much the same way as I have been critical of Lockheed Martin’s approach to the strike fighter, I consider that BAE Systems bears some blame.

--- Later in debate ---

[Thomas Docherty]

Well, I cannot possibly comment on the sums. However, that principle of not committing to a future increase in spending is exactly what this Government have done. We saw it again yesterday at Prime Minister’s questions, when the Prime Minister, in response to what was not the most difficult question from the right hon. Member for North East Hampshire, the Chairman of the Defence Committee—

[Mr Arbuthnot]

It was a very important question.

[Thomas Docherty]

Indeed, but in response to it the Prime Minister failed to give a clear commitment to increase spending.

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[Mr Arbuthnot]

Perhaps the hon. Gentleman will be able to help us further? Has he heard Leader of the Opposition give a commitment to increase defence spending after 2015?

[Thomas Docherty]

I will say two things. First, I have heard my right hon. Friend the Leader of the Opposition speak on many occasions of his great appreciation for the role of our armed forces. Secondly, however, I am also fairly conscious that I am not sitting on the Opposition Front Bench—

[Mr Arbuthnot]

Yet.

[Thomas Docherty]

It may not be happening any time soon after my earlier remarks, and I will perhaps leave it to other colleagues—including perhaps my hon. Friend the Member for North Durham, who is sitting on the Opposition Front Bench—to address the right hon. Gentleman’s point later in the debate.

The hon. Member for Beckenham made a point about seedcorn. On pages 41 and 42 of the Committee’s report, we very clearly tackled the point about seedcorn and future remuneration. We welcome seedcorn as a principle; we very much welcome the notion that we would use our international allies to provide training and personnel support. However, we are also very clear that we do not believe that that can continue beyond 2019, and we actually say that there is huge scepticism about it continuing until 2030. The more that we have examined the issue—again, the Minister can correct me if he wants to—the more that it looks as though 2030 is the realistic time line now, in light of both our inquiry and of course our recent correspondence with the Minister, before we will get back that full capability. I wonder whether the Minister has absolute confidence that our partners—particularly our Five Eye partners—will be able to continue to provide that support to us for effectively 17 years, or perhaps even longer?

On replacement platforms, I hope that one of the things that the Minister reflects on, particularly given the BAE Systems debacle, is that there are other ways to procure replacement platforms. Of course, he will be aware of the model of Saab aircraft. In effect, an existing, tried and proven airframe is taken and then the software is fitted on to that system. Obviously, that model needs to be considered in the light of our report on Tuesday about the need for a defence industrial strategy. Can the Minister confirm whether or not the MOD is actively considering that model as one of the options?

There has also been mention of what the MOD has now called remotely piloted aircraft, which we know as unmanned aerial vehicles, and their future role. Again, there was talk about joined-up government. When we had the debate before Christmas, with the Under-Secretary of State for Defence, the hon. Member for Ludlow (Mr Dunne), who is the Minister with responsibility for defence procurement, the point was made by a number of colleagues that, in relation to maritime surveillance and the role of RPAs, a number of Departments clearly have an interest in maritime surveillance. The Minister might be able to correct me if I miss any on the list, but my note would say that, as well as the MOD, other Departments that have an interest in maritime surveillance include the Department for Transport and the Department for Environment, Food and Rural Affairs, which has lead responsibility for fishing and ensuring that Icelandic boats or, indeed, those of our European partners do not break the law. The Home Office has a role for maritime surveillance, as has the Foreign Office, with its responsibilities for overseas territories.

I hope that the Minister takes this as genuinely helpful advice: the Committee believes that we need a much more joined-up Government. Perhaps the Minister can clarify, in a way that the Minister with responsibility for defence procurement could not, what proactive steps the Department is taking to bring other Departments together to discuss whether we can have a shared acquisition policy for RPA, rather than having four Departments acting differently.

I think that, up to now, this has been a genuinely consensual debate, but the final issue I want to raise, which we touched on in the report, is slightly contentious with the Department. It is about the wide area maritime underwater search project. My colleagues know more about it than I do, so I will not go into any great detail. The Committee feels that WAMUS is an exercise that should have been carried out before or during the SDSR and not afterwards, while we were undertaking an inquiry. It was only after extensive questioning by the Chairman of the Committee and my hon. Friend the Member for Bridgend (Mrs Moon) that we discovered that the RAF and the Ministry of Defence had failed to tell us that the WAMUS project had not only started but had been completed while we were carrying out our SDSR inquiry. Air Vice-Marshal Green and the Minister’s predecessor both accepted that the information should have been shared with the Committee.

I am not suggesting that the RAF, the MOD and the Minister were malicious in withholding information, but I do suggest that there was either arrogance on the part of the Department—not the Minister—or incompetence. I think that it is fair to say that the Chairman of the Committee expressed his disappointment with both the Royal Air Force and the Minister. Mr Brady, I am sure that when the Chairman of the Committee was Chief Whip you never gave him the opportunity to express his disappointment in you. As one of the members of the Committee to whom that has occasionally happened, I can assure you that the Chairman’s disappointment is something that one does not seek to invoke. I hope that, in his response, the Minister will set out how the MOD has learnt the lesson of that mistake and how it is ensuring that the Committee is not let down by the Department again.

I commend the report to the House. This has been an excellent debate, and I look forward to hearing from colleagues.

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[Sir Gerald Howarth (Aldershot) (Con)]

I am delighted to take part in this extended Defence Committee discussion in Westminster Hall, which is, of course, open to a wide audience. As a former member of the Select Committee, I take this opportunity to pay tribute not just to the Chairman, who is my next-door neighbour in Hampshire, my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot)—distinguished neighbour and Select Committee Chairman though he is—but to the entire Committee and its advisers for their detailed analysis of important policy and project considerations. In so doing, the Committee provides an immense service to not just the House of Commons, but the wider public and the Ministry of Defence and its officials.

I confess that I had not realised that the debate would be happening today, but as soon as I heard that it would be I decided that I would like to take part. This is the first time I have taken part in a detailed debate on defence matters since I ceased to be the Minister with responsibility for international security strategy at the Ministry of Defence, and I participate because I feel so passionately about the issue.

Maritime surveillance is of fantastic importance to this country and as my hon. Friend the Member for Beckenham (Bob Stewart) said in an intervention on the hon. Member for Dunfermline and West Fife (Thomas Docherty), it is not simply about the protection of the deterrent. I salute 201 Squadron and the other Nimrod squadrons that perform that fantastically important role. They provide a hugely important capability that is applicable all around the world; we face a much more dangerous and volatile world now than ever before. The capability also, as my hon. Friend the Member for Beckenham pointed out, has a civil dimension. We have responsibilities under the international convention on maritime search and rescue. I think that is what it is called; I tried to establish the exact title, although I seem to remember from my days in the Department that it is called the Chicago convention. As my hon. Friend said, the United Kingdom has an obligation to provide search and rescue right out into the Atlantic, but currently we are not able to provide that capability. It is important to see this as part of a jigsaw. It is not just the United Kingdom providing support for the United Kingdom and the international waters for which we have responsibility, but part of an interlocking NATO capability.

A year ago, I had the great pleasure and privilege of visiting Norway, where the royal Norwegian air force was kind enough to entrust me with its P-3 Orion. [Interruption.] My right hon. Friend the Minister need not worry; I came back safe and sound. I had the Norwegian Defence Minister as a passenger. It was an interesting experience because it enabled me to see not only what the maritime patrol capability delivers, but the role played by our allies. I pay tribute to the royal Norwegian air force for its part in policing the sea lanes between the Russian port of Murmansk and these islands. At 2 o’clock in the afternoon, when one is in complete darkness there, 1,000 feet over black, black water with no horizon and just endless water stretching to the Arctic, it is interesting to realise that without those people the sea lanes would not be patrolled. Mention has been made of the activity that the Russians undertake, and which their forebears in the Soviet Union undertook: sending their submarines around to the north-west coast of the United Kingdom, in particular to Scotland and the constituency of the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne), to observe what we are up to.

The deterrent is a key part of Britain’s defence capability. I will not go into any more detail than has already been given, because we are in danger of trespassing on classified territory, but mention has been made of the importance of the deterrent and the maritime patrol capability in delivering its protection. It is terribly important, therefore, to understand the significance of the capability, and to understand too that it is part of a jigsaw with our neighbours and our NATO allies, and a key element of the defence of the free world.

I must, of course, respond to the charge that I was a member of the Department when we made the decision, as was my right hon. Friend the Minister. We were both there at the time, and it is fair to point out that although the Ministry of Defence was a key part of the whole strategic defence and security review process, there were also other players, not least the National Security Council. I have to say that I think this was the most serious capability gap that we created, but I, at least, did not create it without understanding its significance. I asked the National Security Adviser, Sir Peter Ricketts, “Does the National Security Council understand the significance of the loss of the capability?” I was given the wonderful mandarin response, “Oh, I don’t think you need to worry, Minister; I think they’re fully aware.” Frankly, I do not believe that people in the Government have been fully aware of the significance of the loss.

[Mr Arbuthnot]

To be fair to the National Security Council, describing it as a loss of a capability implies that the capability was in service, which it was not yet, due to aerodynamic and other difficulties with the aeroplane itself.

[Sir Gerald Howarth]

I am grateful to my right hon. Friend for providing me with my cue. It says in the few brief notes that I scribbled down, “Reasons for cancellation”. The first reason for cancellation was indeed that BAE Systems had persistently failed to deliver.

BAE Systems is headquartered in my constituency, and there are people who think that I am in BAE’s pay. Lady Thatcher once said to me, “I hope BAE is still paying you.” BAE Systems has never paid me a penny piece in my life. I think that it is a great company, but on this project, as successive major project reports and National Audit Office reports showed, it failed to deliver. For those who do not understand what I mean when I say that BAE was the design authority—I speak as an aviator—the company is responsible for the design of every bit of the aeroplane. BAE did not even know that the wingsets were about 4 inches different, so it had to more or less hand-make whole new wingsets for each aircraft. That is why I believe the company to be culpable. Yes, I take the point that perhaps more diligence should have been shown by technical officials in the Department, but Ministers cannot be expected to understand all the details of aerodynamics.

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[Mr Jones]

That does not surprise me at all. If we had more time, I could bore Members with some of the ludicrous ideas that were presented to me when I was a Minister by the Treasury, showing a lack of understanding.

The Ministry of Defence claims to have balanced the budget, even though we do not know what is on the whiteboard. The Minister said again this afternoon that he is not prepared to tell us what is on the whiteboard. Is the replacement on there, yes or no? Is, for example, Sentinel, another very important piece of kit, on the whiteboard? Even though it has been deployed to Mali, the Secretary of State indicated in Defence questions the other day that it will somehow be reprieved. If so, what is coming off the budget? Last week’s NAO report said that the £8 billion put aside in reserve may not be enough even to cover the risk in the existing programme. The hon. Member for Mid Worcestershire (Peter Luff) keeps asking at Defence questions for that whiteboard. Until we get to see that and what is actually in the equipment budget, there is no way of telling when the capability will be put forward.

When the hon. Member for North Devon (Sir Nick Harvey) came before the Committee, he was clear that there was no money or indication to replace this capability until 2015. There are unanswered questions. There is clearly a capability gap; the Government admit that. The Committee and the NAO report identified that. No solution has been put forward to resolve that.

[Mr Arbuthnot]

Would the shadow Minister tell us whether the Leader of the Opposition is committed to increasing defence spending year-on-year in real terms after 2015?

[Mr Jones]

I am surprised by the right hon. Gentleman. He is usually non-partisan in such matters. If we do not know what is on the whiteboard, what the budget is or the state of the remaining 55% of the budget, it is difficult to make that determination. The Government made claims last week when they got the figures mixed up and did not understand that the 1% applies only to the equipment budget, not the remaining 55%. Even the NAO report says that that might be swallowed up just by the risk in the existing programme. We need to know such things. Until we do, it is difficult to know what will be capable of replacing this piece of kit.

It has been a good debate, which shows the cross-party nature of the Defence Committee at its best. However, the Government, with the short-sighted decisions they took in the SDSR, among many others, have created a huge capability gap that I fear will have strategic implications for the nation for many years.