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Defence Industrial Strategy

From a sedentary position, the hon. Member for New Forest, East (Dr. Lewis) says ““unpersoned””. I think that everyone knows that we are talking about the development of what was previously referred to as a drone—no offence is meant to anyone in the Chamber. [Laughter.] That is a serious investment in unmanned aerial vehicles, which is vital for the future, and it is also essential in assisting the sustainability of the required capabilities to support our new manned aircraft. Again, that involves a period of fairly dramatic transformation, and clarity and forward ability to manage that transition will maximise benefits to industry, the armed forces and, I hope, the taxpayer. The armoured fighting vehicle fleet remains key to our land forces. Therefore, we must retain a capability to maintain and upgrade both our current and future equipment. We intend to work with BAE Systems Land Systems—the supplier of 95 per cent. of our current inventory—through a partnering agreement that will incentivise it as the systems engineer for the current fleet, contracting for capability provision, and bring advanced land systems technology into the UK. I am pleased to announce the signature today of an agreement articulating the principles under which such partnering will be taken forward. Looking to the future, we need industry to develop the complex system of systems that will make up the future rapid effect system—FRES. The most likely solution will be a team in which national and international companies co-operate to deliver the FRES platforms, led by a systems integrator based in the UK. A high concentration of knowledge relating to the existing fleet, but a healthy international competitive environment, also characterises the helicopter industry. As was announced last spring, we are working with AgustaWestland to promote a more open, predictable but demanding partnered relationship, providing better value for money while reducing the company’s reliance on our investment to sustain the design engineering skill base. We are also undertaking a detailed capability and value for money assessment of the AgustaWestland future Lynx product, in relation to meeting both our battlefield reconnaissance and surface combatant maritime helicopter requirements. As we have long made clear, however, we will continue to look to the vibrant and competitive global marketplace to satisfy our future helicopter requirements. The Government have made a major investment over the past 10 years—through such projects as Storm Shadow and Brimstone—in guided weapons. We attach considerable importance to sustaining capabilities for the design of new weapons, including upgrades, and support through life. However, the scale of our investment in that area, which has been massive in the recent past, is likely to reduce by 40 per cent. over the next five years. That is likely to lead to overcapacity and an inevitable requirement for rationalisation. That might require us to temper international competition in the short term. We will need to consider whether there are approaches that we might take, together with our allies, to maintain critical skills while continuing to show a welcoming face to those other companies that have established a UK presence in this field. In the general munitions sector we regard assured access to ammunition as vital, but that is not to say that each and every component needs to be sourced onshore. Eighty per cent. of our requirements are currently met through a long-term partnering agreement with BAE Systems, the remainder being supplied via competition from a range of suppliers both in the UK and elsewhere. The command, control, communications, intelligence, reconnaissance, counter-terrorism and chemical, biological and radiological protection sectors—all of which are covered in the defence industrial strategy—are growing markets both here and in the United States. That reflects the growing importance of network-enabled capabilities, as well as the sad reality of the terrorist threat that we face. The UK has a number of very successful, highly innovative companies operating in these areas, whose profitability and dynamism are manifest. We intend to continue to look to the market to sustain our requirements. Value for money remains the bedrock of our commercial policy. Competition will remain a major element of that, but it will not be used when other tools, such as partnering, would deliver a better outcome, or where it would impinge on our operational sovereignty. The defence industrial strategy does not signal a move in the direction of protectionism. The UK operates the most open defence market in the world, and is at the heart of efforts to encourage other nations, in Europe and further afield, to follow suit. This is a challenging agenda, requiring real change in the shape of the industrial base. That change will be required in industry, but also in our own practice, and it must involve our sharpness as custodians of taxpayers’ money. All that will not be without pain, but only if we collectively face up to the need for change will we be able to provide our servicemen and women with the equipment that they deserve. Delivering the defence industrial strategy will require sustained effort on both sides, and real leadership on both sides as well. Lord Drayson—who has done so much to produce the strategy—and I are determined to provide that over the coming months, and we look to industry to respond in like fashion. The rewards on offer are substantial. Sustaining the key technologies and capabilities required to maintain the operational edge of our armed forces and preserve national security is first and foremost in our thoughts. We also expect to enhance value for money for the taxpayer through improved acquisition performance, and to achieve better returns, health and sustainability for industry in return for such improved performance. For the nation as a whole, we mean to sustain a high-value, innovative and technology-driven industry that will provide quality skills and quality jobs for the future. On that basis, I commend the defence industrial strategy to the House.