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Defence: Spending Review and Aircraft Carriers

My Lords, I am grateful to noble Lords for their welcome of the Statement. I will do my utmost to answer their questions. The noble Lord, Lord Astor, asked about the contract. I am pleased to inform the House that, following the announcement, BAE and VT have confirmed the creation of the joint venture to the London Stock Exchange. The heads of terms have been signed and people can have confidence that the project has been brought together. I accept the points that noble Lords have made about the time it has taken to get here. I accept that the project has been worked on for a number of years, but the benefit will be the way in which we have reduced the risk in the project. We now have an excellently configured project. There has been tough negotiation to get it to this point, but it has required the whole UK maritime industry to work in a way in which it has never done. I pay tribute to the management and the workforces of the yards involved for how they have been prepared to work together with the Ministry of Defence to enable the announcement today. The clarity on the outcome of the naval base review, with the joint venture and the aircraft carrier orders, gives us what we need to build a globally competitive maritime industry in this country to support what the Navy will require. Both noble Lords asked me about the aircraft to go on to the carrier. I accept that the Harriers are extremely busy in Afghanistan and are doing an excellent job. Our intention is to replace the Harriers next year with Typhoons. We have a project to configure the Typhoons to have ground-attack, close-to-port capability. That is how we will address the Harrier issue next year. I accept the importance of ensuring that the Joint Strike Fighter project proceeds in a way satisfactory to the United Kingdom. We reached a very important agreement last year with the United States on technology transfer. We built on that with the new treaty between the UK and the United States on technology transfer and co-operation across IP in defence. Both those things are positive, but we retain the so-called contingency plans, or plans B. I will be going to Washington later in the year to see the progress being made on technology transfer, and we will absolutely ensure that we receive the necessary operational sovereignty on these aircraft to operate them in the way we need. We will not place orders for these aircraft until they have completed those test flights and we are satisfied at the progress of the project. I am very pleased to confirm that the two new aircraft carriers will be base ported at Portsmouth naval base. The confirmation of the joint venture to the stock exchange gives the workforce in Portsmouth absolute clarity on their future. The fundamentally important and perfect marriage of the support ethos from VT with the experience in ship design and building from BAE gives the right basis for going forward. FRES is on track. We have the trials next week, and I hope to see noble Lords at those trials. I will make sure that that project stays on track because it is clearly the most important project for the British Army. It needs to stay on track. These announcements today enable us to move forward more rapidly on other projects, such as MARS. The industry needs such clarity on base loading, enabling businesses to value themselves and put the joint venture together. We are in negotiations about further Type 45s, so I am sure that noble Lords would not expect me to make additional commitments about that while negotiations continue. Today’s announcement reflects the Government’s commitment to defence, but we should recognise the challenges that we face in defence. As my right honourable friend emphasised, we recognise the need to focus further on operations and the need for flexibility to put the emphasis on the equipment programme to operations. Of course, we will also focus on minimising and dealing with any unit cost growth that we see. I hope that I have answered all the questions. If I have not, I will write to noble Lords