| Previous Section | Index | Home Page |
The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar): I must correct the hon. Gentleman. I did attend the exhibition and visited a number of stands.
Mr. Key: I am grateful for that information. Many people in the industry were not aware that the Minister had been there, and I was going to say that I know he has a tight schedule. I wanted to echo his colleagues who said that we must ensure that naval interests are not neglected. Thousands of companies which are members of the Defence Manufacturers Association and the Society of British Aerospace Companies keep hon. Members very well informed on these issues. They keep an eagle eye on what we do and say in the House, and rightly so.
Let us not forget that the industry is crucial, employing 415,000 people and generating more than £5.5 billion worth of exports. As my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark) rightly said, we all have constituency interests in employment in defence, but that must not be the driving force. However, I pay tribute to the skills and experience of our world-beating British defence work force, to the scientists and engineers and to all the other staff behind them. It is easy to forget all those who make the industry tick, at whatever level they may serve. They have all created and assured the UK's dominant position in world markets. Their success is of direct benefit to the UK economy as a whole and to Britain's defence budget and defence capability.
What exactly is the Government's policy towards such a strategically and economically important section of British industry? I am concerned that there is a lacuna at
the moment. I noticed that a degree of complacency was beginning to creep into this excellent debate. We will not be doing the defence industry a favour if our speeches become nothing but self-congratulatory eulogies.
The Foreign Secretary announced in a blaze of publicity the existence of what he claims to be a new ethical foreign policy which would result in tougher guidelines on the export of defence equipment. I remind the House that the UK has had an ethical foreign policy for 50 years, since the United Kingdom signed up to article 51 of the United Nations charter--and for many years before that, for that matter. The Foreign Secretary's announcement was a relaunch, to put it charitably.
By October, however, the Foreign Secretary was being told by the Prime Minister to lay off arms sales. I welcome the fact that the Labour party is coming to understand the importance of defence exports, but are the Government going to offer any recompense to companies that have lost orders or had their reputations damaged as a result of the delay in the issuing of export licences? An industry survey last month repeatedly found that there were still enormous delays in the processing of open individual export licences, applications and renewals as a result of the
In case the Minister should think that I am a recent convert to these arguments, I must say that I am not. I have been pressing the issue for some time, including with my colleagues in the previous Government. I ask the Minister to consider what I said on 14 October 1996 in the debate on the defence estimates. I said:
I hope that the Minister will pass on this information to the Foreign Secretary who amazed us on 25 November when he said in the House that he was not aware of any delay in the processing of export licences. On 28 October, the Minister warmly offered a generous apology to the House and to me because he had not heard about the increasing delays in export licensing. I understand that things are getting better, and I am delighted to hear it. However, a month later the Foreign Secretary had still not heard about the delay, although we are told that there is a foreign policy-led review. I also hope that the Minister will be able to tell us that additional manpower has been deployed to support the export licensing process.
We do not believe that the defence diversification agency is as necessary as the Government think it is. If it is to have any hope of success, the Secretary of State for Defence and the President of the Board of Trade will have to collaborate much more closely than they have been doing. It is important that we know--I should be grateful if the Minister could let us in on this--whether the Department of Trade and Industry has had a significant input into the strategic defence review. Has it submitted proposals? If so, how will they affect the defence industry.
It is tremendously important that we do not erode the defence science base in this country. I understand the concern felt by hon. Members of all parties who appreciate the need for the greatest technology to be moved into the civil sector as well the defence sector, but we must remember why that science and technology has been developed in the first place.
Our defence industry is being forced by the Government to ride out a period of unprecedented uncertainty. It started on 1 May and will not end until the Government reveal the results of the strategic defence review. In a written answer on 10 July, the Minister of State for the Armed Forces stated that
In addition, defence companies, like British industry as a whole, are labouring under the difficulties caused by the Chancellor's mishandling of the economy. The strong pound and rising interest rates make British exports more expensive to foreign purchasers, and our competitors reap the benefits. The changes announced to company taxation by the Chancellor in his pre-Budget statement last week also had a detrimental effect on financial planning and project management in the defence industry.
During the change-over period in the method of payment of corporation tax, British industry will have to pay £2 billion more in taxation. Defence companies in particular have long lead times on projects and large capital expenditure on equipment, an investment which in some cases is not repaid for a decade or more.
The Chancellor has shown what he thinks of the defence industry by switching funds from defence and nuclear programmes to other Labour ideological idols--all this before even stage 1 of the strategic defence review has been published. The Secretary of State for Defence has capitulated to the Treasury by admitting that
The Minister without Portfolio said on "Question Time" recently that while the Government would stick to Conservative spending plans, they would be moving funds
from Department to Department--perhaps from vital national security programmes to his dome. Bearing in mind the fact that the Chancellor has already shown that defence is not one of his priorities, should we expect the Government to continue raiding the defence budget, as they did recently under the guise of a "fine" to pay for the Chancellor's 10p tax band? We then had "smart procurement", which I fear is another soundbite policy. I do hope, however, that the newly created National Defence Industries Council will facilitate new dialogue and not merely be another talking shop.
I realise that the important element of the new policy is to encourage further European collaboration on defence projects. Conservative Members fully support policies that will lead to more cost-effective defence products, but I am concerned that such a policy could result in a "buy European at any cost" policy and the erection of a fortress Europe in defence procurement. Have the Government taken note of the comments made by Terry Dambusch, the United States ambassador to the Netherlands, at a recent defence exhibition there? He expressed concern that the formation of a western European armaments organisation and the Organisme Conjoint de Co-operation en matiere d'Armament signal the beginnings of projectionist national preference rules.
The result of such a policy would surely be to encourage isolationist sentiment on Capitol hill and damage attempts by United States companies, such as Lockheed Martin--a company with much investment in this country--to ease the American military's policy of buy American. A transatlantic defence trade war would put at risk international defence procurement partnerships, and it would result in higher prices for military equipment world wide and a lack of UK access to US technology.
We should therefore strive to include rather than exclude United States defence companies from the European defence market, especially when the United Kingdom is trying to become involved with the joint strike fighter project.
"ludicrous over-bureaucratic requirements for end-user statements."
The situation has worsened noticeably in recent months, with desk officers rejecting end-user statements on grounds that the industry regards as farcical.
"Subject to the usual inspection and audit, and to severe penalties, there could be a self-licensing system for some exports. A grading system could be introduced in which grade A would involve the sale of non-offensive products to non-offensive countries, such as smoke grenades to Norway, Denmark or Canada; grade B would involve offensive products to non-offensive countries, such as high explosives to NATO countries; and grade C would embrace the sale of offensive products to special countries, which would require special treatment. In none of those cases would licences be granted to prohibited countries such as Iraq or Iran."--[Official Report, 14 October 1996; Vol. 282, c.542.]
It is time for another look at the matter. The Department of Trade and Industry claims to have been examining it for years, but nothing ever seems to get as far as Ministers' desks--it is time that it did. I hope that the Government will implement the Defence Manufacturers Association's suggestion that a standard end-user form should be introduced.
"procurement plans will . . . be considered as part of the Review, including projects already on contract."--[Official Report, 10 July 1997; Vol. 297, c.531.]
Where does that leave the companies that are considering laying down expensive production equipment? Are they to go ahead and see their project cancelled, or wait, and thus delay the in-service date of essential equipment which, as we know, is one of the major nightmares of the industry? Does the Minister believe that the payment of cancellation costs is an appropriate use of taxpayers' money? Would those cancellation costs come out of the defence budget or out of the contingency reserve of the Treasury? These are the questions being asked by the industry.
"we cannot realistically expect more funds for defence".
That leads one to question why the Government are holding a defence review at all if they have already decided that defence will not benefit from the comprehensive spending review.
| Next Section
| Index | Home Page |