Let me begin by following up on the point made by the hon. Member for Mid Worcestershire (Peter Luff), who said that ex-Ministers probably should not boast about their achievements. I say gently to the ex-Minister that if they do not do the boasting, there is probably no one else who will do it on their behalf.
I think we have been greatly served over the past two decades by a succession of good, generous and genuine procurement Ministers, not least Lord Gilbert who so sadly passed away just a few short weeks ago. The spirit of the debate on both sides of the House is testimony to the fact that we believe that providing our men and women who serve so bravely with the correct equipment is an issue on which we should not make too much of a party political point—although Members will forgive me, as we are in Parliament, for making some observations in my speech.
I have a specific question for the Minister, which he may wish to consider, on the reserves and the territorial extent of the provisions. The explanatory notes state that the Bill’s scope on reservists will extend to the Channel Islands and the Isle of Man—so, to Crown dependencies—but do not mention the overseas territories. It is my understanding that Bermuda and Gibraltar raise TA units, and it would be helpful if the Minister could explain why the provisions will not extend to Gibraltar and Bermuda. I know that the Minister is already thinking carefully about the answer he will give me.
There has been some suggestion that the budget is now balanced, but unfortunately the Defence Committee’s view has been that as the Secretary of State has consistently refused to show us the books, we have no way of upholding that judgment. The Prime Minister—he is only the Prime Minister and not Lynton Crosby, so he is not actually running the Government—has said that his preference is for a real-terms increase from 2015 or 2016, but there is some confusion about the date he meant. Perhaps the Minister will explain what will happen if there is no real-terms increase. Will the books go out of budget? This returns me to my exchange with the hon. Member for Mid Worcestershire. If the books are balanced only in the event of a real-terms increase beyond 2015, I am afraid that we shall have another black hole, whether the Minister likes it or not.
I am something of a sceptic when it comes to a GoCo, for a reason that the Minister heard me give only last week when he met members of the Defence Committee representing both sides of the House. There are three reasons for the overruns and programme delays that have led to some of the biggest procurement problems in the last 20 years: those involving the Type 45 destroyer, the joint strike fighter and the Queen Elizabeth class carrier.
First, there is the conspiracy between the defence industry and the services. The industry wants the work and the services want the kit, so they artificially drive down the cost that they declare to Ministers for each project. Surprisingly enough, once the main gate decision has been reached, the costs start to rise to fairly extreme levels. We also see decisions being pushed to the right. As was pointed out by my right hon. Friend the shadow Secretary of State, Labour must take some responsibility—our hands were not entirely clean in this regard—but it is not a new problem.
Secondly, there is the chopping and changing of programmes. We saw that when, following the strategic defence and security review, a carrier decision was changed in favour of a sea variant. After £100 million had been wasted in 18 months, the new Secretary of State made the correct decision to return to the B variant, but unfortunately we are where we are, and, regrettably, the taxpayer is down £100 million. Thirdly, there is the problem of immature decision making on the part of the MOD and the services. They do not necessarily understand what their requirements are in the longer term, and that drives up costs.
The GoCo will not solve any of those problems, but strong ministerial leadership would help to alleviate at least two of them, if not all three. I hope that the Minister will explain how the MOD will tackle the buy-in conspiracies, the chopping and changing, and the lack of mature decision making.
As was made clear by my Friends the Members for Hartlepool (Mr Wright) and for Merthyr Tydfil and Rhymney (Mr Havard)—and, indeed, by the right hon. Member for North East Hampshire (Mr Arbuthnot)—the Committee feels quite strongly about the research budget. We spend only 1.2% of the defence budget on research and development, and not all that money is going to United Kingdom companies. We are, in effect, subsidising other nations. The Defence Committee has an aspiration—it cannot be described as a pledge—to reach a spending level of 2%, and, crucially, we think that that money should be spent on UK companies. We must support our own companies, as the Americans and the French do. We should welcome an update from the Minister on the progress of, for instance, the remotely piloted aircraft programme. I understand that Sentinel will not be funded beyond 2015, and it would be helpful to understand the implications of that now.
May I press the Minister to say more about how two programmes will be dealt with under either GoCo or single source? I will not make my speech about Trident today, because we shall have a three-hour debate on the subject tomorrow, but it would be helpful if the Minister could explain how the common missile programme will be dealt with, in practical terms, under the new arrangements. I should also like to know how the joint
strike fighter programme will be dealt with, given the genuine concern that has been expressed by our closest ally about GoCo and the new arrangements.
I am slightly disappointed that the Bill contains no provision to tackle the “revolving doors”. The Committee is concerned not just about the revelations in The Sunday Times about generals and admirals leaving on a Friday afternoon and popping up in the defence industry on a Monday morning, but about the more general policy. I am not specifically criticising the Bill here, but it would be helpful if the Minister outlined what steps he intends to take, so that we avoid this culture and what appears to the Committee to be an unhealthy relationship between some of our senior military leadership and the defence industry is tidied up.
It is easy to knock civil servants. Politicians have never lost a vote by having a go—[Interruption.] Except in Cheltenham, where I suspect that if a politician knocked the civil servants, they would probably lose quite a lot of their votes. On the whole, however, knocking civil servants is not a difficult gig, and successive Governments have perhaps been guilty of doing that. I think we must recognise the contribution made by our civil servants, however, as we would not have a procurement programme or a functioning defence industry without them. I hope the Minister will say that this is not going to turn into an exercise in beating up civil servants.
I cannot see anything in the Bill about how the pay and conditions for those for whom Bernard Gray wants greater flexibility will be set. The Defence Committee is very concerned that Mr Gray may be seeking to have the power to set the pay and conditions for his management team without ministerial buy-in. Will the Minister explain how he will ensure that there will be ministerial accountability for all the pay and conditions awarded to Mr Gray and his team? We understand the argument about increasing competitiveness, but we must not get into some of the situations that have developed elsewhere, with personal contracts and off-the-books arrangements and tax avoidance, such as for the chief executive of the Student Loans Company. Will the Secretary of State still have to sign-off all individual packages, or does the Minister expect that to be delegated to Mr Gray and his successors?
On the point about invitation to negotiate, it is my understanding that we have seen a slippage from July to August. Can the Minister confirm whether that is indeed the case, and does he understand the concern felt by me and many other Members across the House in respect of the aspirational timeline he has set and the possibility that it will become harder to meet the deadlines? I might not attribute this to the same cynical reasons as the hon. Member for Mid Worcestershire (Peter Luff), but can the Minister assure us that if the date has indeed been moved, there will be no rushing of the later stages to get us back on track?
I appreciate the sentiment behind the aim of trying to transfer financial risk from the MOD to defence contractors, but does the Minister accept that in reality that is impossible, partly because we are talking about buying kit for our men and women serving on the front lines? The MOD will have to own and take accountability for those decisions, therefore, and any slippage or risk will ultimately be borne by the politicians, not BAE or Babcock or whoever else. I am also yet to be convinced that there is a practical way of transferring the financial
risk, because. given the types and the size of the contracts, in the final analysis the MOD will still have to be the underwriter for those projects.
I have asked the Minister this question before, but I did not get a clear answer, so I will ask again: which country does he hold up as a good example of defence procurement? We often hear about the bad examples, but I have yet to hear that there is any good example. Perhaps the Chinese, for the obvious reason they tend to chop people’s heads off when it goes wrong? Which country would the Minister hold up as doing procurement well? The United States has some of the worst examples of procurement. We need only to look at the Strike fighter to see that. That project’s costs have increased 100% in the past 10 years, from $100 million per airframe to $191 million.