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UK Enhances European Defence Capabilities

UK Enhances European Defence Capabilities

Transcript of Oral Statement on Defence Procurement to the House of Commons London, May 16, 2000. Source : UK House of Commons; issued May 17, 2000. Hansard 16 May 2000: Column 149 (3.31 pm).

The Secretary of State for Defence (Mr. Geoffrey Hoon):

With permission, Madam Speaker, I should like to make a statement on two significant defence procurement decisions.

I should like to announce our decisions on a new beyond visual range air-to-air missile to arm the Eurofighter, and on delivering the major enhancements to our strategic airlift capability promised in the strategic defence review.

The Government are committed to the modernisation of our armed forces. We are determined to deliver improvements in defence capability, to underpin long-term security and to ensure that Britain can act as a real force for good in the world. Our armed forces deserve the best equipment. We are committed to ensuring that they have the best equipment. However, we are also committed to doing that in a cost-effective way that offers the best value for taxpayers' money. Smart procurement means making every pound count.

We are also aware of the wider context. The procurement package we have selected is clear evidence for our partners on both sides of the Atlantic of our strong commitment to enhance European defence capabilities. NATO's effectiveness depends on continuing technological improvement and on equitable burden sharing. The European defence initiative lies at the heart of that--for the good of Europe, the transatlantic alliance and the international community as a whole. The BVRAAM is a vital component of the Eurofighter's ability to dominate the skies. It promises to be a highly accurate, highly manoeuvrable missile that will significantly improve Eurofighter's "no escape" zone, and will thus ensure that this world-class aircraft can combat all projected air threats. It will make a major contribution to the air superiority requirements of UK and coalition operations--including NATO operations. Our priority is to sustain Eurofighter's superior capability as far as possible into its service life, which will extend well towards the middle of the century. We need to secure the highest performance, at the best overall value for the taxpayer.

We have had the advantage of a strong competition with high quality bids from Matra BAE Dynamics and Raytheon Systems Ltd. The competition has been keenly fought, and many right hon. and hon. Members have written to me and to other Ministers.

After a thorough--indeed exhaustive--process, we have concluded that the Meteor missile offered by Matra BAE Dynamics and its consortium is likely best to meet our needs over the life of the Eurofighter aircraft. The overall performance promised by Meteor will ensure that Eurofighter is equipped with the best weapon possible and will deliver the air superiority that is central to success in military operations.

Meteor is a collaborative venture with Germany, Italy and Spain--our Eurofighter partners--France and, we hope, Sweden. We plan to conclude a memorandum of understanding with those European partners by the end of the year, formally committing us all to the programme. Subject also to agreement of satisfactory terms and conditions with Matra BAE Dynamics, we will award a contract as soon as possible.

It will be a smart contract. Tightly defined breakpoints in the contract will be linked to flight tests and other demonstrable achievements. Those will focus on, first, the ram-jet motor; then guidance systems and, finally, data links and electronic counter-measures. Specific dates will be attached to each.

Those breakpoints will be auditable and capable of external independent evaluation. If they are not delivered, the contract will be terminated by the partner nations who will recover all development costs from the contractor.

Meteor is expected to enter service with the RAF in the latter half of this decade. Meanwhile, we intend to buy more of the currently highly capable advanced medium range air-to-air missile, produced by Raytheon, to equip Eurofighter when it first comes into service.

Our decision will give the Royal Air Force the most advanced air-to-air missile in the world. It will be welcome to our European partners, and it will also be welcomed by our US allies as a clear indication of our commitment to a strong defence capability, available for all operations in which the United Kingdom might be involved.

Industry in the United Kingdom will also welcome the decision. Matra BAE estimates that it will create or sustain some 1,200 jobs in the UK, including at Stevenage, Bristol and Stanmore. Many of those will be high-quality jobs in new technology, and in system and software design. The United Kingdom will lead this major project.

I turn now to our strategic airlift requirements

Improving the mobility and deployability of our forces was a key theme of the strategic defence review. Events in the Balkans and, more recently, in Mozambique and Sierra Leone have underlined the high priority of increasing our strategic airlift capability. Both NATO's defence capabilities initiative and the headline goal adopted at the Helsinki European Council identify this capability as one in which Europeans need to make particular improvements.

We have explored a number of possible avenues to meet our immediate needs as well as the longer-term requirements. After careful consideration, we have determined that the best short to medium-term solution is a lease of four C17 Globemaster aircraft from the Boeing company. They will begin the first of several years of service with the RAF from the middle of next year. These flexible, capable aircraft will deliver vital, early support to our new joint rapid reaction forces. They will also make a crucial contribution to improving the airlift capabilities available for NATO and European operations and to interoperability with the United States. Beyond that short-term lease, we have now decided that our heavy lift needs, from the latter part of this decade onwards, would be best met by the A400M aircraft from Airbus Military company. This promises to be a superb aircraft--a new design that is specifically tailored to meet our military requirement. Moreover, the A400M will offer an extremely flexible capability, covering both the tactical and strategic roles. It offers scope for a multinational support package and substantial through-life cost savings.

At this point, our commitment to A400M is necessarily conditional, in that it is based on assumptions that are dependent both on our potential partners and on Airbus--on their commitments to sufficient numbers of aircraft at launch and the establishment of a viable programme.

We hope that we can sign a contract for the A400M urgently, but this must be based on realistic figures for purchase. All countries must balance the size of firm commitments against other priorities for defence equipment. The United Kingdom will order 25 aircraft in the A400M initial launch. That is sufficient to build a viable programme while safeguarding our industrial interests. We look forward to other partners following our lead, so that together we may confirm the launch order as soon as possible.

However, affordability will also rest on confirmation of unit prices at the level offered by Airbus, commitment of the in-service date that we require and satisfactory negotiation of commercial terms and conditions. Programme launch and contract placement must also be achieved within a reasonable time frame.

This will also be a smart process. We will hold European industry to its promises. If Airbus cannot offer us and our partners an affordable and manageable programme on that basis, we will be able to meet our military requirement and protect taxpayers' interests by purchasing a fleet of Boeing C17 aircraft as an alternative. However, we look forward to success in this exciting and innovative programme.

A400M will offer great benefits for the United Kingdom. BAE Systems expects the programme to create directly 3,400 long-term, high-skill, high-wage jobs--in particular at its sites at Filton, Broughton and Prestwick--with indirect employment taking the figure to more than 10,000.

Our industry will be at the forefront of developments in the aircraft's new technology, including a carbon composite and metallic hybrid wing and a new propulsion system. The project will strengthen the European aerospace industry, and will complement the world-leading wing capabilities of British industry, which we are supporting through the major investment that we have recently announced for the development of the A3XX.

A vital and technologically innovative element of the A400M will be its engines. Airbus Military, as prime contractor, will be responsible for selecting the best power plant so that the aircraft will meet its commitments to the partner nations on performance and price. However, we will make sure that, in its decision, Airbus Military takes full account of the merits of the likely proposal from Rolls-Royce and the undeniable quality of its products.

These procurement decisions are of great importance for our armed forces and for our defence capability for several decades to come. They deliver on our promises in the strategic defence review. They make a significant contribution to Europe's defence capabilities and they are good news for British industry and for British jobs. I commend them to the House.

Full transcript of Commons debate that followed Mr. Hoon's statement.

Mr. Iain Duncan Smith (Chingford and Woodford Green): I thank the Secretary of State for his announcement and for passing me his statement early. Today's announcement has at last begun to clarify the important procurement decisions in, for example, the strategic defence review, on which so much of our armed forces' future capability rests. Giving Typhoon a proper air-to-air missile to keep it a potent weapon system and

16 May 2000 : Column 152

providing heavy lift to allow our troops to be properly deployed were critical elements of the strategic defence review, as the Secretary of State will recall.

Before putting questions to the Secretary of State, I should like to make a general point. Surely, the decisions could, and should, have been made earlier. Is it not a fact that too many Ministries have a finger in the pie, especially the Treasury? As a result, the decisions have been delayed, perhaps unnecessarily. The Government committing themselves to early decisions while insisting that industry produces on time and within budget is a feature of smart procurement. If, as seems to be the case here, the Government fall at the first significant hurdle, what hope is there for future smart procurement programmes?

The Government made two significant announcements today. Their decision to go ahead with the purchase of Meteor as a solution to their BVRAAM requirement will be widely welcomed. I therefore congratulate Matra BAE Dynamics on its successful bid, which, it believes, will secure high-quality technology-related jobs for some time. However, questions need to be asked. Given the doubts that the Secretary of State expressed about Sweden in his statement, has he received cast-iron assurances from all the other partners who are likely--or whom he believes are likely--to order the missile?

The Meteor contract is to produce equipment at the cutting edge of technology. The Secretary of State accepts that and has made it clear that that entails some risks. He outlined his concerns about those risks today, saying that he has set specific dates by which the progress of the programme can be audited. Critically, he has said that the programme will be terminated if those are not met.

Is the Secretary of State prepared to tell us what those dates are so that we can judge whether the programme is proceeding in accordance with the plans? He spoke about how compliance with that programme was going to be audited. Given the changes that he has announced to the Defence Evaluation and Research Agency, who does he expect to carry out the independent audit, which, in the past, DERA might well have carried out?

Bearing in mind the fact that the United Kingdom is bearing the largest share of the costs, what will happen if a British Government wish to terminate a programme which they consider is not being met, but which others do not? How can we make a such a decision without incurring penalties? How will we recoup costs in that eventuality and what plans has the Secretary of State made for that?

The Secretary of State was rather vague about the in-service date. Will he clarify that detail by putting it on record when he returns to the Dispatch Box? He said that much had been said about US embargoes on future export orders. No doubt, that is one reason why we chose Meteor in the circumstances. What consideration has been given to the possibility of partners in the consortium embargoing others wishing to sell the missile on? The Secretary of State said that the USA would welcome the order. However, given that the President has lobbied the Prime Minister over the past few months, to what extent is this another case of the Foreign Office giving the Secretary of State a load of bad advice?

On the heavy lift contract, we welcome the Secretary of State's announcement on leasing four C17s while placing an order for 25 A400M aircraft. Once again,

16 May 2000 : Column 153

however, serious questions need to be answered. On the A400M, how confident is the Secretary of State that the other nations will order, either at all or in sufficient numbers to make the project viable? I note, for example, that the Italians have not only dropped the initial number that they were planning to order, but seem recently to have indicated doubts about ordering any at all. The Germans have been blowing colder and colder on the project as the weeks have gone by.

Is not the announcement of an order of 25 a significant reduction from the UK's anticipated commitment of 45? Will not that, coupled with the lease of four C17s, send a message to nations that are in doubt about their orders that the UK Government are not as committed as they at first appeared? For example, what has the Secretary of State been told about the critical number that needs to be ordered before the contract is viable? How long is the lease for the C17s?

The Secretary of State seems slightly less than positive in his announcement on the A400M, hedging it with many caveats and conditions. Will not that, together with his announcement that he will purchase C17s if he cannot reach an agreement on the A400M, also send a mixed signal to our European partners? Is not his announcement in some senses likely to pose serious logistical questions to the RAF? Surely the prospect of the RAF having to find spares, relevant infrastructure and training for three different air frames raises questions about costs beyond purchase costs. How will the C17s be supported? Will there be a support facility in the UK, or is he anticipating that that task will be done from the USA?

In congratulating BAE Systems on securing the order, the Secretary of State must agree that such questions will need to be answered if BAE is to feel confident in committing the investment and capital that the project requires without raising serious concerns about future decisions and doubts about its viability.

Although manufacturing production and development skills rest hugely on the success of the two orders, it is most critical that the armed forces, as I am sure the Secretary of State will acknowledge, get the equipment that they need to fulfil their operational requirements. That, we believe, is the most important point.

Mr. Hoon: I am grateful to the hon. Gentleman for his initial observations and, indeed, for his general support for the decisions that the Government have taken. I shall endeavour to deal with as many of the more detailed points that he raised as possible, but in the event of my failing to do so, I shall certainly write to him with more specific detail.

In response to the many observations that the hon. Gentleman made about both projects, let me say that it is clearly necessary to be conditional in our approach to such multinational operations because they depend on decisions by our partners. The alternative, for any Government, is simply to go into the market and purchase equipment off the shelf. We could do that, but we are choosing to try to buy the best, most technologically sophisticated equipment. That depends very much on working with partner nations. That is the way in which we are approaching these decisions.

The hon. Gentleman mentioned doubts about Sweden. There are no doubts about Sweden; we are simply trying to attract it to the project in order that the missile may be

16 May 2000 : Column 154

available to its aircraft. The memorandum of understanding still has to be agreed with our partner nations; that is necessarily so, as I have said, in any multinational project.

I can certainly publish details of the breakpoints and determination of when those assessments will be made once the memorandum of understanding is established. The breakpoints will be a certain period after that date. We shall retain the elements of DERA that give Government advice about the nature of contracts. That was part of the understanding that we set out.

On the in-service date, we anticipate the missile being available towards the end of the decade. On the US attitude, the package will provide significant job opportunities in the United States as well as in Europe. It is in the nature of modern defence industries that they operate around the globe--certainly across the Atlantic. I do not anticipate any difficulty in announcing orders that will create jobs to supply AMRAAM as well as the C17 heavy lift aircraft.

We are confident about the A400M. We are leading the way: we shall be the first country to have officially announced our order for A400M, and we believe that will provide a strong signal for our partners to do the same. Twenty-five is a realistic estimate of the number of aircraft that we require: 26 Hercules aircraft are to replaced by 25 A400Ms, but the A400M will have a capacity that is one and a half times greater than that of the Hercules; therefore, we are investing in significantly enhanced capability for the RAF. The RAF will not be required to maintain or train crew for three air frames. The idea behind leasing the C17s is that, once the A400M comes into service, it will replace the C17; then, we shall be dependent on a mixed fleet of two aircraft.

Mr. Barry Jones (Alyn and Deeside): My right hon. Friend's excellent statement presages many new manufacturing jobs for Britain, as well as an enhanced defence capability. Will he tell the House when the production of the A400M will begin and the locations at which it will be built? He will not be surprised if I volunteer the services of 4,200 Airbus workers in my constituency to make the wings, because we have a centre of excellence and world-class capability. Will he give further details of the reasons behind the size of the order? We had hoped that 35 would be ordered, and we should like to know why it is to be 25. None the less, the statement is a good one and my right hon. Friend should be thanked.

 

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