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Defence Procurement

It is a great privilege to follow the hon. Member for Salisbury (Robert Key), who spoke so eloquently. He dwelt on slightly bigger themes, and I shall try to make various points in a similar vein. The UK spends £32 billion a year on defence— 2.5 per cent. of our GDP. That might be half the proportion of the mid-1980s, but in gross terms it is the fifth highest such spend in the world. It should be enough to maintain a substantial force, but we struggle. Our defence procurement system is not good at turning tax pounds into the equipment our armed forces need. Bluntly, the UK's defence procurement budget is spent more in the interests of a few privileged defence contractors than it is in the interests of our armed forces. An ineffective Ministry of Defence pays wildly high prices for kit that it suits the contractor to provide. The MOD pays double, or even triple the price, for what are often inferior products. I could talk at length about the catalogue of incompetence, but I shall confine my comments to helicopter procurement. Sensibly, a decision was made to buy Apache helicopters, which are a good piece of American kit. However, in order to preserve jobs, or perhaps award large contracts to privileged suppliers, it was decided to assemble them in the UK. The cost of that protectionism has been vast, and is still being paid in Afghanistan today. Our UK-assembled Apaches cost approximately £40 million each—three times what the Israelis paid for theirs. Worse, by not buying directly off the shelf, we have ensured that only a handful of Apaches can serve in Helmand. Parts from the unused fleet in the west country are being cannibalised to keep our few Apaches in Helmand airborne. If we had bought directly from Boeing, we would have more Apaches—more of those decisive, battle-winning weapons—in Afghanistan. I say to those who perceive defence procurement as an exercise in job creation rather than war winning that, if we had bought directly from Boeing, we could have given the 755 employees of Augusta £1 million each and still saved £1 billion. As a job preservation scheme, such protectionism was ludicrous. Protectionism also explains why our armed forces do not have enough transport helicopters. The Ministry of Defence placed a £1 billion order for the new Lynx at £14 million each. The problem is that they will not be ready for several years. When I was at the air base in Kandahar, I saw an ancient, grounded Lynx, which the new Lynx is supposed to replace. It was designed for the cold war and is simply not operating in Afghanistan as it should. Next to it, I saw row after row of unused United States Black Hawks. They would cost only £6 million each and could be available in months if only we were not so protectionist. Thanks to the Ministry of Defence, we spend twice as much on buying an inferior helicopter, which will not be available for years, from an Italian company. Similar points could be made about Merlin and the Chinook. Not only the taxpayer pays the price for that decision. In Iraq and Afghanistan, helicopters save lives. Every helicopter means fewer road journeys, fewer targets for improvised explosive devices, fewer bombed and broken troop carriers and fewer casualties. We pay a high price for the protectionist defence procurement policy. Thanks to our relationship with Finmeccanica, we do not have enough helicopters. When Brigadier Ed Butler arrived back from Afghanistan, he was asked what piece of equipment he most needed. ““Helicopters””, he said. I do not recall his specifying that they had to be built by Finmeccanica. The defence industrial strategy claims to be about providing the armed forces with the equipment that they require on time, and at best value for money for the taxpayer, but saying it does not make it so. The defence industrial strategy is based on the flawed premise that we need sovereignty of supply. That is lobbyist speak for, ““The defence procurement budget must go to a privileged few.”” Sovereignty of supply is a superficially attractive argument, but it is idiotic, not patriotic. The premise is flawed because one simply cannot buy an exclusively British jet fighter, helicopter or missile; such equipment is too sophisticated. Sovereignty of supply is an argument for protectionism. One might as well argue that the UK needs self-sufficiency in food production. Doubtless it could be done with a massive protectionist effort. Doubtless a case could be made that, if we did not become self-sufficient, we could be starved out. However, most people recognise that that does not wash. For centuries, we have imported food—and provisions for our armed forces. In what sense are the privileged few companies from which we are obliged to buy our defence kit British? Is Finmeccanica, maker of the new Lynx, British? Now that BAE has sold off Airbus, in what sense does awarding Airbus the £2.5 billion contract to deliver the A400M transport planes preserve British jobs? With so many contracts outside the UK, why continue to treat BAE as a British company? The sovereignty of supply argument is about preserving the privileged status of a tiny handful of defence contractors. The defence industrial strategy is about maintaining a guarantee that some contractors will have a permanent income stream from British taxpayers. It is no surprise that the biggest supporter of the defence industrial strategy is BAE. Protectionism and the defence industrial strategy are wrong not because other companies cannot get a fair crack at supplying business but because our armed forces do not get the equipment that they need when they need it. It is not patriotic, but idiotic. The farce continues because there is no effective accountability for defence procurement. As an aspect of public policy, it is no longer settled by those whom we can elect at the ballot box. Regardless of which Member of Parliament is the departmental mouthpiece, the defence contractors get the contracts that they want and our armed forces do not get the kit that they need. Civil servants escape censure for monumental inefficiencies; the Member of Parliament who happens to serve as the departmental mouthpiece loyally and faithfully recites the line that Sir Humphrey gives him. Remote officials make the decisions and our armed forces take the rap. No one is accountable and no one is sacked. That is how our defence procurement works today. I have tried tabling parliamentary questions about the Ministry of Defence's appalling decisions in the interests of what I believe to be a few select contractors. Sir Humphrey has cited commercial confidentiality to avoid revealing the truth. I know from first-hand conversations with officials that the competitive procurement process for the new Lynx took place in name only. The process was made to fit the outcome. Yet, unlike our armed forces in Afghanistan, senior officials in the Ministry of Defence can simply avoid the consequences of the appalling failure. In the House, it has become the Table Office's default setting to refuse to accept questions about BAE and its Saudi dealings, despite the existence of sufficient evidence to warrant such legitimate questions. While Members of the legislature are no longer able to hold the Executive to account, a sophisticated lobbying exercise aims at shutting down the debate. How many Members of Parliament who, like me, have taken part in the armed forces parliamentary scheme know that it is funded by the same contractors as the defence industrial strategy privileges? I suspect that the answer is not many, because the armed forces parliamentary scheme refuses to open the books. I raised the subject of defence contracts and procurement after my visit to Afghanistan and I was directly pressurised by the organisers of the armed forces parliamentary scheme for asking such questions. Without accountability, the defence industrial strategy will remain unchallenged. Its retention will maintain the near monopoly of BAE and a handful of others. As long as BAE remains the monopoly supplier, we will not get value for money. For all the management consultant speak about smart procurement and through-life contracts, basic economic literacy shows that, in defence as elsewhere, a near monopoly provider means that the buyer gets a poor deal. When there is a constraint on supply, the seller sets the terms of trade. Recently, BAE was handed another £124 million contract to build an unmanned aerial vehicle that we should have bought off the shelf. If one is in Helmand and one needs a UAV that works, one does not care where it is built. We do not merely need to buy off the shelf; we need to break the monopoly of the few suppliers. If we did that, we might buy the kit that we need instead of waiting until BAE is ready to supply what it is willing to provide. We might supply our armed forces with the best kit available. If we did that, we might well have less outmoded kit—fewer anti-Soviet tanks, less submarine-hunting kit, fewer Eurofighters to defend the skies over the north German plain, fewer old-style frigates ready to take on the communist navy in the north Atlantic—and more of the kit that our armed forces need to fight the wars to which we send them. Finally, I salute Lewis Page, the author and journalist, who has grasped what so few Labour Members have understood.