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Defence Acquisition

My Lords, at Question Time in your Lordships’ House on 9 July this year, I said that, ""in the private sector, if one trades when one knows that one’s operation is insolvent, that is a criminal offence. At the present time, the Ministry of Defence, frankly, is bust. There is a yawning gap between resources and commitments"." The noble Lord, Lord Drayson, replied: ""My Lords, I am afraid that I do not recognise at all the characterisation that the noble Lord has just set out".—[Official Report, 9/7/09; col. 760.]" The noble Lord is known as a very bright chap with a successful track record in the private sector. Surely when he answered my question the Government must have been aware of the scale of the problem because, as the Gray report points out, ""On average, these programmes cost 40% more than … originally expected … and are delivered 80% later than first estimates predicted. In sum, this could be expected to add up to a cost overrun of approximately £35bn"." That is equivalent to approximately one year’s total defence expenditure. The phrase in the Statement on, ""the tendency of programmes to cost more"," must be the understatement of the year. Surely Ministers and officials must have been aware of the scale of the problem, yet the Government chose to sail on. Looking back, surely it was irresponsible to place orders for the two new aircraft carriers—with, no doubt, substantial penalties for cancellation and their implied major costs of aircraft, to say nothing of manning and escort costs—against the financial background of which we now hear. The Statement also uses this rather extraordinary sentence: ""The service chiefs have made it clear that our service personnel are never asked to undertake missions unless we are fully satisfied that they have the right equipment to do the job"." How can that possibly square with the equipment deficiencies that we were certainly aware of as the Afghanistan campaign commenced? On the Report itself, in my copy pages 48 to 51 and pages 68 to 71 appear to be missing, while pages 52, 54 and 64 to 66 are duplicated. How long have Ministers been sitting on the Report and, linked to that, how long did they deliberate before rejecting Gray’s recommendation to establish the Defence Equipment and Support organisation as a government-owned, contractor-operated entity? Will L.E.K. Consulting be continuing its work on the implementation phase and will private sector expertise be called on to implement certain changes? Overall, however, as far as these Benches are concerned, we very much welcome this thorough report and support many of its recommendations. Indeed, we ought really to have a full report to do justice to its importance and scale. We particularly welcome a more frequent and regular Strategic Defence Review and the recommendation to, ""plan equipment expenditure on a longer timeframe, with a 10-year indicative planning horizon for equipment spending agreed with the Treasury"." Finally, in broad terms, how do the Government intend to balance the books—by providing more resources or by cancelling major projects? There really is no third way, irrespective of the Gray report, which quite rightly focuses on future procurement matters.