10 JUNE 2004

Dr Sarah Beaver and Mr Stuart Fraser

  Q40  Lord Morris of Aberavon: Looking back historically, joint procurement, if that is the right word these days, has a very chequered history. My recollections go back more than thirty years, and since that time, as I am sure Lord King will bear out, there have been some wins and some no-wins at all. Can you tell me precisely what is seen by Her Majesty's Government are the prospects of the agency being involved in common EU defence procurement policies in the near future, and in what areas is it envisaged, given the expenditure we are putting in, although it is so far modest—what exactly in the next five years do you expect to get out of it?

  Mr Fraser: You have picked on two separate aspects there, Lord Morris. You alluded to the chequered history of the collaborative programmes we have had in the past. Some of those are well presented in the media as having had their chequered histories. Others have seen successful operational experience, such as Tornado, EH101, Jaguar, the Anglo-French family of helicopter programmes, and of course we have great prospects for the A400M heavy airlift programme, and the Meteor missile, the new missile that would go on the Eurofighter Typhoon, the French Rafale and the Swedish Gripen. Perhaps it goes back to Lord Tomlinson's added value question, but through this increased focus on capabilities, which will be the opportunity presented by this permanent staff and by the determination of the defence ministers, the governments of the Member States, to provide a better basis through a more rigorous disciplined examination of future capability needs, and how those capability needs will then translate themselves into equipment outputs, therefore providing a better basis to judge whether there is sufficient common ground for that military requirement to go ahead with the co-operative programme with a number of nations, or whether it is something that would best be developed designed individually or bought off the shelf from somewhere, if it is available off the shelf. The point I am trying to make is that against that background of a better look at capabilities, you will provide a better basis that there should be improved judgments made over some of those that have been made in the past where nations have thought they had a joint requirement, but once the programme began they found, "what we meant by that is different to what you meant by that"; and then we end up with having non-common arrangements on programmes and the difficulties start to mount. We have high hopes that the Agency will provide that focus. Then we do have the OCCAR organisation in Bonn, which is still a fledgling organisation because it only gained legal status in January 2001. It is managing a modest array of six programmes at the moment, but it does include the very important A400M, and that is really its flagship programme, and its success will be judged on the delivery of those aircraft and other programmes in the appropriate timescales. You used the term "common procurement". We hope that the focus that there will be on trying to address the somewhat fragmented European defence equipment market that exists now, with nations essentially going their own way, is to try and recognise that the very good and effective work that has gone on in industry over the last ten years or more to restructure to take out a lot of the duplication in nations that existed—to try and mirror-image that in the Government's approach to its procurement policies. One of the early aims of the agency is to try and get the Member States to agree to a more coherent, transparent, competitive market place—I would say consistent with the way we conduct that procurement in the defence sector in this country, where we do believe we have an open, transparent and competitive market place, as is evidenced by the amount of business that is placed in various countries in the world, the companies in those countries.

  Q41  Lord Morris of Aberavon: Is there anything new in this?

  Mr Fraser: The new bit is in the focus of having, as Dr Beaver said earlier, a permanent staff.

  Q42  Lord Morris of Aberavon: I got that, yes.

  Mr Fraser: That will focus on this—

  Q43  Lord Morris of Aberavon: It will be new machinery, but anything new in the aims and objects and the hoped-for practice?

  Mr Fraser: The increased effectiveness of OCCAR, I hope, as the years go on; the fact that we are learning lessons from previous collaborative programmes; and we realise that in addition to the point that I made about needing to benefit from better definition of the capability, the equipment requirement, that we might also develop our thoughts collectively in avoiding inefficiencies such as juste retour in terms of work share, where, as I know Lord King will remember from his days as Secretary of State for Defence, that was one of the issues that affected the Eurofighter programme at the time, where we had a slavish adherence to work share, where everybody had to have their work share down to the decimal point, and that created inefficiencies and problems and delays in those equipment contracts being placed. Another area is the recognition that we do need to press for real defence companies managing these very important collaborative programmes because in the past we have agreed the set-up for companies which effectively did not have sufficient authority and autonomy; they always had to revert back to the parent companies in the Member nations of the particular programme. We need to get away from that and recognise that we need proper companies. I think we have achieved that in the two I have mentioned earlier with the A400M and the Meteor missile with AMSL for the A400M programme and MBDA for the Meteor programme.

  Q44  Lord King of Bridgwater: That is what you are doing now. The lessons have been learnt and it is a continual learning process on these joint procurements. In each one of them different problems have arisen and you have tackled them. I am not sure that we can see the Agency necessarily as being the way in which problems that were insolvable before are suddenly going to be solvable now because that is what you do now.

  Mr Fraser: You might well be right. I think the only point, if I can go back to this, is the very first point I made in answer to Lord Morris's question, that there is a renewed determination I think, a fresh determination, with that focus of a permanent staff to ensure better capability definition that will provide the basis for better judgments to be made about the equipment solutions to meet those capability needs.

  Q45  Lord Morris of Aberavon: When you have different countries with different military philosophies, it is very difficult to reconcile them, like with the Chieftain tank and the Leopard, where the strategies were completely different and for me as a layman they were difficult to understand. Have we got over those problems within Europe of different military philosophies?

  Dr Beaver: I do not think we will ever get over those entirely. What I think has happened a lot in recent years is that we have had far more deployment of troops on operations on a multinational basis in a way that we did not during the Cold War period, and so with the habits of working together in the Balkans, in Afghanistan, in Iraq, we are seeing a lot more the importance of countries working together. I think some of this does feed back into a more common understanding of what it is that we are trying to do.

Lord Morris of Aberavon: That is very valuable. If I can look back for a moment and remember we had had four or five different types of bread supplied to the UN troops in Cyprus. That is a long time ago and I hope we have moved on from then.

Baroness Park of Monmouth: So far, you and we have been concentrating perhaps on capabilities and on getting people to cough up for defence when they will not, but there is also the element of research. Defence research seems to me to be a very delicate area in which it is extremely doubtful, I would have said, whether the main players will be very prepared to exchange their information. I would have thought that ministries like the DTI might be quite interested in the outcome of all this. Are we really happy that there will be any value to us as a country in moving into an area where we might be involved in a considerable amount of pressure for common research and access, which will be just as sensitive for the French and the Germans as for us? The small countries, relatively speaking, will not have an interest either way. I cannot quite see how it is going to work.

  Q46  Chairman: Perhaps, in answering Lady Park's question, you could comment on whether it is relevant and what we are going to learn from the reported co-operation between ourselves and the French over the aircraft carriers.

  Dr Beaver: There are a number of issues on this. I will answer some and I think Stuart Fraser will handle some of the other points. I understand your concern about this sharing of information. In our discussions about the Agency proposal, we have been very keen to allow there to be flexibility in how this works. It is not always going to be all nations; there are provisions for ad hoc project groups where you opt in; there are groups in which two or three countries will work together and will set down a framework for participation. Those of us who are already signatories of the LOI (letter of intent) framework agreement do have confidence and have signed the necessary arrangements.

  Q47  Lord King of Bridgwater: So there is a letter of intent framework agreement. Is that what you are saying?

  Dr Beaver: Yes. I understand your concern. We certainly want to build, and felt for ourselves that it would be more sensible for the most part, things on this voluntary basis of two or three countries gathering together and looking at a research issue together with a specific end in mind. That said, there are some areas where it might be helpful for there to be some common research across the piece in Europe that we would all, those of us who have defence forces, get something out of. There is also provision for that in the joint action, but there is also provision for countries to opt out because certainly with our science budget, our research budget, we will need to be very careful as to how it is used. We will not wish to be forced to co-operate in programmes unless that is going to represent something that is needed for United Kingdom purposes and looks like good value for money.

  Mr Fraser: I was going to add a couple of points in answer to Baroness Park's question on defence R&T if I may and really to say that there has been a significant history of defence R&T in Europe associated with the Western European Armaments Group, the strangely named MOUs like Euclid and Socrates and latterly the Europa MOU, which is aimed to produce a sort of fledgling replacement for those older MOUs. There has been a lot of successful R&T undertaken in Europe under the Western European Armaments Group over many years now. I think what we are hoping to get from the translation to the European Defence Agency is a greater coherence amongst the work that is undertaken there, the work that is undertaken in the LOI Framework Agreement under the Group of Research Directors, such that there is a better focus on relating a lot of that R&T to the identified capability needs for future European military requirements, a better focus than perhaps some of the R&T has been targeted on in the past and therefore provide better value for money. I suppose it would be only fair to say that in bringing R&T as a central feature to the European Defence Agency, I am sure there will be a determination by the Head of the Agency and the Member States to try and cajole and encourage a number of states, which perhaps do not make as great a proportion of financial contribution to R&T as perhaps they might, to make that larger contribution.

  Q48  Lord Tomlinson: Can I ask you a question that has been puzzling me from the start? I thought it might become clear during the answers. At the beginning, Dr Beaver, you explained to us how historically Her Majesty's Government had been opposed to the idea of the establishment of a European Defence Agency. Now I have heard fairly substantial discussion that leaves me still reasonably confused as to what the perceived benefits are going to be in practice, what I would like to know is: what was the great flash of light on the road to Damascus that made people change their mind and say, "This which we have historically opposed we are now very enthusiastic about, we are committed to, we are going to be proselytisers for". What was the event that persuaded us that this was no longer a bad idea but a good one?

  Dr Beaver: To answer that, this change of mind came in the context of the discussion of the Defence Working Group about the new Treaty.

  Q49  Lord Tomlinson: The Defence Working Group in the Convention?

  Dr Beaver: Yes. What had originally been proposed was an armaments and research agency. It was thinking in government by ministers that said, "We have not supported this. We do not want an armaments-driven agency in Europe, but what we do need in Europe is a sustained, steady focus on the improvement of defence capabilities". If we could harness that as the primary focus of the Agency—and if you look at the mission statement, that is what it is—then that might be, or would be, a worthwhile enterprise. That is where the United Kingdom effort has gone, to try and be sure that this thing is capability-focused rather than armaments and research focused, which had been the objective of previous endeavours.

  Q50  Lord Tomlinson: You see, I chaired the meetings of the British participants in the Convention on the Future of Europe with all parties from both Houses, including the Government, including the Members of the European Parliament. I must say, as a chairman of those monthly meetings of all our participants, I never had that same sense of importance of conversion about the idea of the European Defence Agency. I just wondered where its genesis was. Did it emerge in the Ministry of Defence? I did not notice it in my discussions with the Prime Minister particularly; I did not notice it in my discussions with my colleagues in the Convention. I just really want to know where the impetus for it was.

  Dr Beaver: I think the decisions were made in government as a whole. There were certainly discussions within government. I do not think it is my position to disclose the details of all of those discussions. It was certainly in the context of looking at the work of the Defence Working Group.

  Q51  Lord Tomlinson: Was it seen as some sort of concession that might help us to make progress or was it seen as a positive advantage? Was it seen as something where it was felt that if we are going to have some red line areas, we had better get off this one because we do not want to have too many red line areas? I never got quite that sense as to where it was.

  Dr Beaver: It was not a red line area. I think this was an example of the Prime Minister's wish that we should take a constructive lead in Europe by shaping proposals to something that would actually mean something and be acceptable, indeed beneficial perhaps, from a United Kingdom perspective. We contributed our proposals for a capability-driven, focused agency in November 2002. That was reflected in the final Defence Working Group report that came out in December where it was recognised that you could have a capabilities-driven agency and that this had been suggested.

  Q52  Chairman: Can I perhaps just ask you this? On a previous occasion we have seen proposals from the Commission about their desire to be involved in security research. Do you see that proposal and those desires as having any potential conflict with the functions of the Agency?

  Dr Beaver: I have to say that there are some potentially awkward boundary issues between these two and the responsibility for the security and research is really primarily a Trade and Industry function. Some of the Member States have been very anxious to ensure that the Agency does not exclude the possibility of the Agency working alongside with the Commission and its money on some joint project, and so that is not excluded altogether. The United Kingdom will obviously wish to look at any proposals for this very carefully.

  Q53  Baroness Park of Monmouth: I have a brief minor point. Under policy implications, I read that decisions will be by qualified majority voting but that we have negotiated an emergency brake mechanism, which appeared in Article 9.3 and in Article 24 and 24(b). Supposing that the Treaty is not ratified, is not finally agreed, what will the position be then?

  Dr Beaver: The decision-making arrangements prescribed within this joint action will be the arrangements that will prevail.

  Q54  Baroness Park of Monmouth: Even though it is related to Articles in the Treaty?

  Dr Beaver: This is the current Treaty.

  Q55  Baroness Park of Monmouth: I see. Thank you.

  Dr Beaver: Presumably if voting weights were changed under the new Treaty, when that is ratified, then the joint action will need to be amended accordingly.

  Chairman: Is it not included in the Article? Article 9 is the Article in the draft proposal, is it not?

  Baroness Park of Monmouth: That is what I thought, in the draft Treaty.

  Q56  Chairman: I think you are right. It perpetuates it, surely? On page 12, as I read it: "If a representative of a Participating Member State in the Steering Board declares that, for important and stated reasons of national policy . . . a vote shall not be taken." It may be referred on to the Council. I think it is actually in your draft joint action and not just in the Treaty.

  Dr Beaver: Yes. The emergency brake arrangement in the joint action) is slightly different because any Member State can refer it to the Council.

  Q57  Chairman: Perhaps we will look at that. I think it is in Article 9 and it is "of a Participating Member State" the "national policy". If we are wrong about that, perhaps you could let us know. Baroness Park's question was: what happens to that safeguard if the Treaty was not ratified? I understood you to say that this is dealt with because it is in the existing Treaty. I, however, suggested that perhaps the Article 9, which is referred to in the explanatory memorandum, is in fact the Article 9 of the Draft Council joint action, which seems to repeat it, so we are relying actually on the draft action plan, not on the existing Treaty. Is that correct?

  Dr Beaver: The QMV that will be applied within the Agency is as specified within this joint action, but there is a reference to the voting weights set out.

Baroness Park of Monmouth: That is a different issue

Chairman: I am sorry. I think Lady Park was merely referring to the principle of qualified majority voting and not what made up the weighting of qualified majority voting. Is that correct?

Baroness Park of Monmouth: I was.

Chairman: I think there is nothing between us in that case. May I ask if there are any other questions? Dr Beaver and Mr Fraser, thank you very much indeed for coming. Thank you for responding so fully to what I think has been a somewhat robust questioning session. We are very grateful to you for giving us so much time.