Members present:
              Rt Hon Bruce George, in the Chair
              Mr Julian Brazier
              Mr Jamie Cann
              Mr Harry Cohen
              Mr Mike Gapes
              Mr Mike Hancock
              Mr Jimmy Hood
              Dr Julian Lewis
              Laura Moffatt
                 RT HON GEOFFREY HOON, a Member of the House, Secretary of State, MR
           KEVIN TEBBIT CMG, Permanent Secretary, MR RICHARD HATFIELD,
           Permanent Under-Secretary, Ministry of Defence, examined.
        153.     Secretary of State, Mr Tebbit, Mr Hatfield, welcome, although
  it is rather ironic to welcome you to a room I have never been in before.  We
  are both playing away today but hopefully we will not meet in this environment
  for some considerable time, while it is a rather splendid cabinet structure. 
  We have seen, but did not have much time to closely scrutinise, your documents
  published today.  Secretary of State, in your Defence Policy 2001 document,
  will the "informed defence community" be able to detect any nuanced shifts in
  policy when they have had a chance to study it?  I am not asking you to do our
  work for us, but is there any major or minor shift or nuance shift in policy
  contained in this document?
        (Mr Hoon)   I think it is fair to say there is no major shift, there is
  no significant and fundamental change in policy.  There is, perhaps, as is
  always the case, a degree of emphasis in different areas, and the significance
  of that might be only obvious over time.  There is greater emphasis on joined-
  up conflict prevention, for example - something we have discussed in the past
  - but there is certainly a greater emphasis on that in this document.  There
  is greater emphasis on improving multinational defence co-operation.  Again,
  that is not new to any Member of this Committee but something we emphasise
  more than previously.  It will come as no surprise to the Committee, either,
  that we set great store by the importance of learning lessons from the Kosovo
  campaign - something that you have emphasised to us that we should do.  Again,
  that is emphasised.  So there are a number of points here that certainly will
  allow the informed defence community to look thoughtfully at the trends; they
  are trends emerging from principles that we have discussed on many occasions
  in the past and will not, I suspect, come as any great surprise to Members of
  the Committee.
        154.     You have been in office long enough now to be able to make a
  judgment as to whether this "informed defence community" is increasing or
  decreasing in size.  Do you detect any greater interest in defence issues from
  meetings you attend or press and media reports, or Parliamentary
  contributions?  Are you trying to move this small community into being rather
  enlarged, which is in everybody's interest?
        (Mr Hoon)   Certainly I have always remarked on the contrast between
  discussing defence and security issues in Washington as opposed to discussing
  them in London.  I think that there is a need for the kind of detailed
  consideration given to defence issues that exists in the United States in the
  United Kingdom.  So I would certainly welcome more discussion of these issues. 
  Nevertheless, those that are engaged in this debate in the United Kingdom do
  so very seriously and, obviously, part of the purpose of publishing these
  papers in this form is to give them more material and access to more material
  to inform that debate.  You invite me to comment on the press and the media. 
  I think there is concern about the extent to which specialist correspondents
  are given the opportunity of writing about their specialist subject.  I find,
  sometimes, I have concerns about the extent to which those that do know about
  the subject are given the opportunity of writing about it.  That is probably
  a matter for the newspapers, but I suspect sometimes that the copy of defence
  correspondents who, perhaps, know both sides of the argument is not always as
  dramatic and as interesting to news editors as those who do not know as much
  about the subject.  Finally, I think it is right that I should say something
  about the work that this Committee does, because I do recognise that the
  Committee have contributed to improving the level and the nature of the
  debate.  I thank you for that.
        155.     You know what we say, Secretary of State.  If the Ministry of
  Defence was as open as we are, we would be very, very happy.  We are trying
  very hard to get you in our direction.  In paragraph 7 of the report,
  Secretary of State, you say "There is no sign that operational demands are
  likely to diminish".  Despite the slight rise in defence expenditure, we
  clearly do not have the resources to meet every demand.  How are you going to
  decide which demands are going to be met and which demands are not going to
  be met?
        (Mr Hoon)   I do not think there is a simple formula for that.  Clearly,
  when you say that there are not resources to meet every demand I think that
  is self-evidently true, but we make what are pragmatic judgments in the light
  of resources and in the light of the people that we have available to do the
  job.  Clearly, those are judgments made across Government and it is,
  obviously, my job as Secretary of State for Defence to inform my colleagues
  of the state of preparedness and availability of Britain's armed forces and
  to do so within the general parameters set out in the Strategic Defence Review
  but not to regard the Strategic Defence Review as a formula.  It is not
  something that we can apply precisely to every situation.  What we have to try
  and do is to work within the capabilities that we identify there and ensure
  that we are able to satisfy the legitimate demands of those who expect
  Britain's armed forces to defend Britain's vital national interests.
        156.     It seems patently obvious to us that despite your endeavours
  to squeeze more blood out of a stone it is becoming increasingly difficult. 
  We are producing a report on personnel issues in a couple of weeks and
  although finance is not the panacea to resolve all of the problems it is a
  very substantial element of it.  I think we have to try even harder to
  persuade Treasury that if they expect you to do the tasks that appear to be
  necessary it is going to be increasingly difficult to do with the budgetary
  constraints within which the Ministry of Defence is operating.  If you decide
  to cut your commitments then the public have to be told "We simply cannot
  afford to do it".  However, to meet pensions, to meet the salaries, to meet
  training and to meet commitments to Sierra Leone, the Falklands and
  everywhere, it is quite wondrous that you manage to do it with the miserly sum
  that you are allocated by the Treasury.  I think at least ten Members of the
  Committee will agree with what I have said.  If we were in charge, we would
  happily find 1 per cent of GDP, I think, without much hesitation and take the
  consequences from the Treasury.
        (Mr Hoon)   As I have said to you before, no Defence Secretary is ever
  going to turn down support for more resources for the defence budget, and I
  am certainly not going to do that.  Having said that, equally, I think it is
  important we put into context what we are doing today and actually we are
  satisfying the demands on us in a range of different theatres and operations. 
  Whilst, particularly as far as certain areas of speciality are concerned, I
  would certainly like to see more people and more resources, nevertheless
  compared to - and we have discussed this before - the period towards the end
  of 1999 immediately after my appointment, when I recognised publicly that
  there was a degree of over-stretch, we have been able to make very significant
  reductions, certainly as far as the Army is concerned, in terms of the numbers
  of personnel actually deployed or on operations.  That I think has improved
  significantly many of the problems that I felt we were facing towards the end
  of 1999.  I am not being complacent about it, but I do not think the picture
  is quite as bleak as, perhaps, your observations might tend to suggest.
        157.     Thank you.  In paragraph 11 of this 2001 document, you say:
  "There is likely to be growing emphasis on multinational approaches to
  developing improved capabilities, especially in relation to filling capability
  gaps ... ".  Would you care to expand on this statement and, perhaps, give
  some concrete examples?
        (Mr Hoon)   Yes.  I hope it is consistent with what you have said already
  that even the United States, with the budget that they have available,
  recognises that there are limits to the amount of money they can spend and the
  amount of capability that they can generate.  That is even more the case for
  a country like the United Kingdom.  One of the advantages, I perceive, of
  multinational co-operation is being able to work with allies and partners,
  particularly to develop capabilities that are not readily available to us
  today.  That is part of the underlying purpose of the Helsinki headline goal,
  to encourage countries to recognise that there is a range of capability that,
  ideally, is capability that we would like to have available, but that
  individually it would be difficult for them to afford.  You ask for an
  example.  One of the examples that we are looking at is a search and rescue
  facility which is not something which, traditionally, other than on an ad hoc
  basis, the United Kingdom has judged to be vital to develop.  On the other
  hand, the United States has certainly developed a very sophisticated ability,
  the French are probably ahead of us in having that capability and we would
  like to find ways in which we can work with other countries to develop that. 
  There are a number of other things that we are working on, not least the
  suppression of enemy air defences, where co-operation with a number of
  countries is now quite well-advanced - again, to provide a capability that we
  do not have available to us as an individual nation but which, working in
  combination with others, we can develop.
        158.     Thank you.  Are these documents going to be annually
        (Mr Hoon)   In a sense, part of the reason for publishing these documents
  in this way is to break out of a deliberate annual process in order to try and
  provide documents as and when we judge them to be necessary.  However, I think
  it is fair to say the policy document is perhaps something that the Committee
  might find helpful on a regular basis.  To some extent it is an area where I
  would be grateful for your views, because it does seem to me that if you find
  this kind of process useful - and it is a change from what has been done
  before - then we could look at the timing in the light of your feelings.  I
  would have thought publishing something like this on an annual basis, without
  being fixed on particular dates, is sensible.
        159.     With this mania for contracting out, if your resources are
  constrained, Mr Hoon, you can contract out the task to us, and I am sure we
  would do a very good job.  I am also sure you would be the first to sign up
  for what we would produce!
        (Mr Hoon)   I can see many advantages of contracting it out to you on
  that basis, because you would be bound to produce a statement of Government
        Chairman:   I do not think it would be Treasury policy we would produce. 
  The next block of questions we all fought to ask, but I am afraid Laura
  Moffatt won the task.
                             Laura Moffatt
        160.     I am a lucky girl.  Good morning.  There are some issues I
  would like to raise within the new published The Future Strategic Context for
  Defence.  I draw your attention to the part in purple on page 8 that talks
  about the revolutionary changes within procurement and the way in which the
  MOD would like to exploit what is happening in civil developments for
  technical equipment for the MOD.  Our continuing question has to be to you,
  Secretary of State, how do you expect to do that if you are just about to sell
        (Mr Hoon)   I am not at all persuaded that there is any inconsistency
  between the two propositions that you put forward.  One of the reasons why I
  was persuaded, having looked at this afresh, that it was sensible to sell part
  of DERA was because of the difficulty of a single, Government-run organisation
  keeping pace with technological advances and that what we needed was to have
  a way of encouraging those who work for that part of DERA to be able to have
  access to both the wider world of technological change but, equally, for them
  to find exciting the prospect of working within that particular organisation. 
  As far as the part that we judge it is necessary to retain in public ownership
  is concerned, one of the essential tests of that was to ensure the
  continuation of independent objective advice to Government about the nature
  of assessing technology as far as Government procurement was concerned.  That,
  as I have said to you before and I repeat, will remain within public ownership
  and, therefore, public control.
        161.     It remains this Committee's concern that that very important
  statement that you have just made about the independent objective advice may
  be put at risk and that companies who are developing new technologies in civil
  research may not have the confidence to believe that they are able to share
        (Mr Hoon)   The distinction that we are drawing is between, if you like,
  the basic research and having the right kind of people to be engaged in the
  excitement of first-stage research as against the ability then of scientists
  to be able to make an assessment of that research when it is applied to
  particular projects that we are contemplating purchasing on behalf of the
  country.  That is the division that we have set out very clearly in the way
  in which we are dividing the existing operation.  Kevin, do you want to say
        (Mr Tebbit) Just to add to that, we will be keeping system integration
  work, the sensitive technology work, the intelligent and client/customer role,
  a lot of very high-quality scientists and, also, a contracting function to
  make sure that we are getting what we need and know exactly what it is we
  require, not just from the privatised DERA but from all the other elements in
  the private sector that are doing critical research to defence.  We have
  already started on closing contracts - just, at the moment, a small proportion
  of our research block - out to competition.  Interestingly, DERA won 70 per
  cent of those contracts on merit, but other people won 30 per cent of those
  contracts, and we would see that, I think, as a way of increasing this
  resource that we can use in science, that is not just limited to DERA.
        Chairman:   We are all waiting for Wednesday 28 to interrogate your
  colleague, the Baroness.  I hope she comes in with all the answers.  Leave has
  been cancelled, I must tell you.
                             Laura Moffatt
        162.     Secretary of State, can we turn to page 10 of the same
  document?  Again, in the highlighted purple section on that page it speaks of
  the sharing of specialisations in our forces amongst our allies.  I wonder if
  you could give us an indication of which of those specialisations will remain
  in the United Kingdom and which you believe could go to our allies?
        (Mr Hoon)   When you say "could go to our allies", I think what we have
  to do, on an entirely pragmatic basis, is judge what capabilities we have
  available and what other countries would be prepared to co-operate with in
  developing.  I gave a couple of illustrations earlier of the kinds of things
  where we perceive there to be gaps.  I think it is logical and flows from what
  we are doing in relation to Helsinki and the headline goal that the process
  of making an assessment of the kinds of capabilities that each country has -
  and, in a sense, that is when we reach a capabilities conference in November -
  then leads to a proper debate which is under way and which will be the next
  stage of the process of assessing where are the gaps.  What are the
  deficiencies in capability that the countries of Europe (and what countries
  of NATO have is a parallel process in NATO) in order to be able to participate
  in the likely modern deployments that the Community needs?  In those
  circumstances, the next stage of identifying those gaps will almost
  necessarily involve a degree of multinational co-operation because it follows,
  logically, at this stage, that if individual countries have not had the
  ability to satisfy those gaps they are unlikely to be able to do so in the
  short-term but are more likely, having identified the gaps, to be able to work
  together to remedy those problems.
        163.     Has a protocol been developed to, really, get down to - once
  you have identified gaps - who is best able to fill them?  Has any work been
  started on that?
        (Mr Hoon)   I think it is a very good question because it is an obviously
  sensitive issue between countries as to how those particular gaps will be
  addressed.  There is not a precise protocol or formula for achieving that. 
  There are some indications of the way in which this will be tackled.  The
  Dutch Defence Minister, for example, has made clear to the members of the
  Netherlands parliament that he will make judgments for the future of
  procurement in the Netherlands in the light of the headline goals.  He will,
  on behalf of his country, say "Is this decision going to contribute to
  satisfying the headline goal in reaching a conclusion?"  The United Kingdom
  is not in that position because our defence needs and our capabilities are far
  more extensive than simply those set out in the headline goal, but,
  nevertheless, it is an interesting indication of the way that a particular
  country, with some considerable military capability, views the importance of
  this process.  I think you can look as well at, for example, the Scandinavian
  perspective on the Nordic Brigade, because, again, historically it has been
  difficult for smaller countries to participate in these kinds of multinational
  operations because, essentially, they have been trying to complement what
  already exists in terms of capability.  If they can fill a particular required
  segment of what is needed then that is both good for the alliance or for the
  European Union as well as being very positive for those particular countries. 
  I think there are a range of other areas.  I think one of the things that we
  are undoubtedly concerned about are medical services.  There is no doubt that
  a number of the countries who, perhaps, do not necessarily have our war-
  fighting ability will be very pleased to contribute medical services - which,
  actually, make a huge difference to our ability to conduct operations.
        164.     I hope that is not an excuse not to do anything about our own
  medical services.
        (Mr Hoon)   It is not an excuse at all, but it is realistic.
        Laura Moffatt: Last question on the Strategic Context document.  In
  paragraph 84 it rightly speaks about the need for superior intelligence and
  the importance of headquarters.  Has any thought been given to how that may
  impact on personnel and how it structures the way in which we do business for
  the future?
        165.     Information superiority, I think.
        (Mr Hatfield)  Indeed.  There is a lot going on about this in our own
  country.  America has gone into this at great length and General (inaudible)
  has a particular programme at the moment.  For us there is a sort of two-step
  process: there is the step of getting the most out of what we have got in the
  service now, and in the course of the next 10 to 15 years there will be a huge
  step-jump as we get in not only new information systems but the precision
  weapons which can be used and the ability to link it up.  Work is already
  going on to think about how, if you like, the concept of using those forces
  will change when all those capabilities are in, in 10 to 15 years.  There is
  no blueprint yet, either here or in the United States, but there is very
  active work and thinking about the concept which will only be possible when
  you have got the whole group of precision weapons and the IS, as the jargon
  goes, and the stuff to go with it.
                                Mr Hood
        166.     I wonder if I could ask a question on reporting cycle
  documents, Secretary of State.  This was another question that was in great
  demand, and I was lucky enough to win this one.  To what extent do you find
  that the documents in the MoD's annual reporting cycle, particularly the
  Expenditure Plans, the Performance Report and the Investment Strategy, are
  moving swiftly enough in the direction of linking outputs to resources
        (Mr Hoon)   The particular documents that we have published are obviously
  prepared for publication and, therefore, have that character, but I think it
  is fair to say that part of the underlying reason for changing the nature of
  the documents that we publish and make available is to link that publication
  more closely to the work that goes on inside the department.  In a sense, what
  we are trying to do is to open up the processes that lead to our reaching
  particular conclusions for greater examination by the public and, obviously,
  by this Select Committee.  So, in a sense, what we are publishing is a
  distilled form of the documents that we rely on in reaching precisely the
  conclusions on decisions and on outputs, therefore, that we have within the
  department.  So I think the real answer is that there is a connection but it
  is not that these documents are directly leading to particular outputs and
  particular conclusions, but they are certainly based on a wider process that
  goes on inside the Ministry of Defence.
        167.     You are agreeing, I think, that you see them as a useful
  management tool?
        (Mr Hoon)   This is the distinction I am trying to draw.  The particular
  documents are prepared for publication but they are based on more detailed
  work that goes on inside the Ministry of Defence that, therefore, is part of
  the management process of reaching conclusions in the department and therefore
  taking decisions.  So, in a sense, we cannot publish every single document
  that the Ministry of Defence depends on, but it does mean that you are seeing,
  in a sense, a picture of the wider work that is conducted.
        168.     Do they enable you to prioritise your resource decisions with
  confidence so that you understand the effect that you will be having on
  defence outputs?
        (Mr Hoon)   I am confident that it does because resources are an integral
  part of any manager's decision about the way in which we reach conclusions. 
  Balancing the resources that we have with the decisions we take and the
  particular equipment that we purchase is the essence of any management
  decision in any organisation.  Perhaps the best person to respond to that is
  the accounting officer, but ultimately, obviously, I take responsibility for
  those decisions and it is central to what we try and achieve.  Kevin might
  want to add something.
        (Mr Tebbit) It does run very similar to what you would recognise in
  a modern business.  Ministers set the priorities for the department on a daily
  basis, but also the Defence Council.  We know that we have to deliver the
  Strategic Defence Review, that we have to modernise the department generally,
  that we have to, in particular, apply lessons from operations such as Kosovo
  and that we have to put in place a package for our people, which is a wide
  thing.  That is then done by the Defence Monitoring Board.  We have very
  detailed discussions which attach resources to those priorities, cascaded down
  to all sort of programmes.  Indeed, later today we will be presenting a very
  detailed plan allocating resources to those priorities to the Secretary of
  State and his colleagues in the Defence Council.  In driving that forward over
  the year we are using a thing called the Balance Scorecard, which I have
  mentioned at a previous meeting, which is a modern technique used by most
  companies for tracking the way in which resources are being used to deliver
  objectives in-year.  It gives us signals red, amber or green, according to
  whether these are on track, needing attention or going badly.  So we do have
  a very complex and efficient (complex because we are a big organisation, but
  simple in the sense that it is clear from top down through to the operating
  units) scorecard on how we are doing.  What we cannot do yet is link our money
  precisely to outputs.  The reason for that is simply the degree of accounting
  change which we are in the middle of, because of the transition to resource
  accounts.  Once we have completed that transition - and this coming year is
  the first year which will be run on accruals rather than cash, which is a
  different currency - then we will be making progress in more sophisticated
  output budgeting.  At present we can only really talk in terms of three big
  outputs: Department of State policy, the equipment programme and our
  operational expenditure, but that will get more sophisticated as we go along.
        169.     What would you say is the most useful management information
  tool available to the MoD?
        (Mr Tebbit) What we are developing, this Balance Scorecard, covers the
  key - at the moment there are about 17 or 18 - priority areas that we judge
  important, and that will be giving us - when I say "will be" it is starting
  in September, so it is coming up on a quarterly basis - the main internal
  accounts for driving this.  The Secretary of State will get reports on this
  on a quarterly basis, and it will be the opportunity for intervention in our
        170.     To be still more basic about it, the most important document
  that we continue to work from is, of course, the Strategic Defence Review, in
  the sense that that sets out a programme.  It has always struck me that my
  job, essentially, was to work within the framework of the Strategic Defence
  Review delivering what had been worked through - subject, obviously (and these
  documents reflect it) to the kinds of change of emphasis that inevitably will
  occur as the world moves on.  In terms of a basic position, I do not think
  that you could do better than look at the Strategic Defence Review as a
  starting point for judging what we have to achieve in the Ministry of Defence.
        171.     You said, Secretary of State, that the documents you produce
  are just a distillation of other documentation that the public are going to
  be able to look at.  Is there a series of documents upon which the public face
  of your own Strategic Defence Review was constructed?  If this document is
  only a fraction, we saw the SDR as a fraction, are you satisfied the public
  is as aware as it should be and will require to be of the options you are
  working to and not just a three-volume, glossy document which is the tip of
  a very large iceberg?
        (Mr Hoon)   I tried to give the Committee a sense of the huge amount of
  work that must inevitably underlie this kind of publication.  I am sure you
  did not intent to disparage it by calling it "a glossy" but the reality is
  there is an astonishing amount of information here that has not previously
  been published.  Like any organisation, like any company, we take decisions
  against a background of a very large amount of information and a very large
  amount of work that is done.  What I was trying to get across is the sense in
  which we are seeking to extend the public debate about the processes of
  decision-making by the publication of this sort of document, which is for
  publication but which is based on the kind of work that goes on inside the
        Chairman:   In fairness, there is a lot of documentation coming out -
  much more than there ever has been.
                              Mr Hancock
        172.     I am intrigued by the scorecard business.  None of your
  reports ever flag up the amber and red situations for wider participation of
  Parliament, do they?  That is the failure, really.  We only ever get the green
  gloss rather than the amber and red warning signs.  The failure, surely, and
  the lack of transparency is in those two particular areas.
        (Mr Tebbit) Internal management always requires people to actually
  look at where management attention needs to be focused.  That is not the same
  as saying things are red in terms of the total judgment of the thing, but
  where we need to give management attention to make sure it is put right.  That
  is what you would expect us to do.  I do not think we gloss over areas.  I
  remember this discussion with you last time.  We were not saying, for example,
  that we were satisfied with our performance on medical services, it needs to
  improve, and we were honest about that.
        (Mr Hoon)   I was just looking for that precise point, because in
  preparing for our meeting I was actually conscious of a number of areas where
  we had indicated our concerns, and medical services was one of them.  I do not
  think it is entirely fair to say that we do not flag up the difficulties.
        173.     But you are flagging that up, Secretary of State, to justify
  a significant change in policy, which some of us actually do not agree is
  going to make the situation better.
        (Mr Hoon)   I am sorry that I do not have your conspiratorial view of
        Mr Hancock: I think you did a little while ago.
                              Mr Brazier
        174.     Just before my question, could I ask Mr Tebbit, while he is
  here, how we are doing on letting the Committee have the other four-fifths of
  the list of efficiency savings?
        (Mr Tebbit) As I explained, I think, and as we have explained to the
  Committee on several occasions and I thought we had discussed this rather
  fully last time, we do not capture inefficiencies in every single detail at
  the centre, it is a devolved process to the budget-holders.  What we gave you
  was an illustration.  I have an internal process of audit which assures us
  that these efficiencies are genuinely real.  That is done by the Defence
  Management Organisation - our internal audit process.  As you know, we struck
  efficiencies very high last year, at 590-odd million, and this year we are
  on track for 500 million of efficiencies.  I also said that I was not
  satisfied that this was an ideal way of doing our efficiency process, and we
  are going to be in discussion with ministers about ways of linking our
  efficiencies more clearly to our outputs rather than to this rather abstract
  counting of money, which is not necessarily telling us about how we are
  performing, because it is a gross figure rather than a net figure in the
  organisation.  It tells us nothing about the overall thrust of our
  achievement.  However, I am not aware that I said I was going to give you a
  paper detailing every single piece of our past efficiencies.
        175.     I think there was reference to the document.
        (Mr Tebbit) I think I told you we were going to be moving forward with
  our efficiency process and that I would keep you informed.
        176.     The more information, I am certain, the welcome.
        (Mr Hoon)   Could I help to this extent, Mr Brazier, that I was impressed
  by the comments you had made previously about the efficiency process in the
  department, and I can assure you that we are looking at new and different ways
  of securing efficiency that, I hope, will be more effective as far as the
  department is concerned but, I also hope, will satisfy you that your previous
  criticisms have been taken on board.
        177.     Great, a move towards transparency and very welcome, I am
  certain, for the whole Committee.  The question I would like to ask, Secretary
  of State, is on the key trends in the application of resources over the next
  decade - specifically, the balance between the two main items, expenditure on
  equipment and expenditure on personnel.  If, for the sake of brevity, I could
  throw in an example with the main question: there is a hint somewhere in your
  policy document that you see more investment in better and better equipment
  leading gradually to personnel savings in looking at the through-life costs
  as a whole.  How do you see the balance going between personnel and equipment
  savings over the long time-frame you are looking at in your policy document?
        (Mr Hoon)   You know that it was an objective of the Strategic Defence
  Review for the Ministry of Defence to spend a greater proportion of its budget
  on equipment than in the past.  That was set out and, broadly speaking, that
  is what we have sought to do.  However, if your question is implying somehow
  that there is, as a result, a lack of emphasis on personnel then I can
  reassure you that that is not the case.  We would not allow any change in
  extra spending on equipment to, in any way, affect our policy for people. 
  Indeed, what we are looking at are ways of ensuring that we continue to
  support people in the Ministry of Defence and to a still greater extent than
  ever before.  There is a great deal of effort being made to ensure proper
  levels of pay and that we address difficulties in relation to retention and
  operational welfare, accommodation and so on.  The extra spending on equipment
  is not in any way affecting our policies for people.
        (Mr Hatfield)  Can I explain a point you picked up?  The reference to
  investing in equipment in order to save people is against the background that
  we expect the size of the pool of the right age group to reduce quite
  significantly over the next 10 to 15 years.  If we look in paragraph 18 of the
  Strategic Context document there are some statistics.  One of the ways of
  responding to that, apart from increasing our recruiting effort, is to try and
  reduce the requirement for service manpower, in particular, to operate
  equipment and support it.
        178.     I understand that point in general, but I had a helpful
  answer at the beginning of the week to a question on RAF Fastjet pilots.  We
  are now a staggering 17 per cent short.  Our biggest single equipment
  programme by far, the Eurofighter - is it really sound to be investing the
  staggering sums we are in this very important programme if we are not going
  to be able to fully man it until 2010?
        (Mr Hoon)   We are going to be able to fully man it.  Indeed, we are able
  to carry out the range of operations that we need to today.  That is not to
  say that we are in any way complacent about those shortages, and there are
  other areas where we are concerned about key personnel and where we are taking
  appropriate action as far as financial incentives, for example, are concerned
  targeted at those particular shortages.  To amplify Mr Hatfield's point, every
  major organisation today is looking at demographic trends, and we, in
  particular, recruit 25,000 young people every year.  If the numbers from which
  we are recruiting are falling (and most big organisations are concerned about
  that) inevitably there will be more competition for the talented people that
  we want to recruit.  In those circumstances, we have to address those issues
  in order to maintain the pool of pilots and other skills that we will require
  in the future.  The one advantage of using Eurofighter as an example is that
  we do have some time in order to train people.  The actual problem, though,
  Mr Brazier, just to make it quite clear, is not recruitment.  We can train any
  number of pilots, it takes time but there are very many willing volunteers. 
  The problem is keeping them.
        179.     Just a final one on that and then a related question: why is
  it that the RAF's record in retaining volunteer reserve Fastjet pilots is so
  pitifully small?  They have a pool of seven part-time Fastjet pilots.  In
  America it is a large proportion of the total, and even our own tiny Royal
  Naval Reserves has 14 Fastjet volunteer reserve pilots.  Surely that is
  something which should be looked at.
        (Mr Hoon)   It is something that we are looking at.  It is something that
  I recognise we could improve and it is an ambition that we should make that
  pool larger.  However, equally, we looked at the problem of retention as far
  as our pilots are concerned, and the answer to your point is that there are
  a range of different factors affecting retention as far as pilots are
  concerned.  Frankly, the state of the economy is probably the single most
  important reason, because whilst the economy continues to grow the amount of
  resources that individuals have available increases, they can spend more on
  flying abroad for their vacations and that is increasing the demand for pilots
  in the civil sector.
        180.     Final question: I suspect we see the hand of Mr Hatfield in
  this and I look forward to reading it properly after the meeting.  We had
  mention from the Permanent Under-Secretary earlier of the importance of
  getting feedback from actual operations.  Is there not a danger that the
  growing dominance of peace support operations - as we are currently involved
  in now - may not bias the overall setting of priorities as against a much
  wider spectrum  of problems and risks that we may face, which your policy
  document rightly points to?
        (Mr Hoon)   I think it is a fair concern to express, and certainly
  whenever I have meetings with the Chief - and it is right to pay tribute, at
  this stage, to Charles Guthrie who is retiring - he has constantly emphasised
  to me the importance of maintaining our war-fighting skills.  I doubt, with
  his retirement, that view of the Chiefs will change because it is an area
  where the United Kingdom has particular abilities, and you are right that it
  would be quite wrong for us to neglect those skills at the expense of others.
        (Mr Hatfield)  I think it is fair to say that we have actually had
  experience of high intensity conflict in the last two or three years.  So I
  do not think it necessarily follows that peace support operations take the
  focus away from that either.
        181.     Had we had to do the land entry I would agree with your
        (Mr Tebbit) Chairman, I will just mention that in terms of joined-up
  war-fighting, the reason why we have, for example, a rolling programme of
  large, joined-up war-fighting exercises, such as Swift Sword, is to make the
  forces, as it were, continue to be capable of that type of skill and
  operation, not just in peace support.  Could I possibly just go back - I know
  this is improper - on the balance of investment issues?  I think it is still
  quite important.  There is a real distinction between the sort of issues we
  face over targeted retention problems - for example pilots - which are not
  about the overall amount of money we have at our disposal, it is about very
  difficult questions of retention and labour markets and morale, and that sort
  of thing, and, at the other end of the spectrum, this wider issue of trends. 
  The most important trend, if you are looking for a balance of movement from
  equipment, as it were, to front-line people would be, for example, in the
  logistics organisation.  The business change programme we have there is
  needed, because at the moment we have got over 40,000 in our logistics ----
        182.     We are just coming to that later on.
        (Mr Tebbit) It is in those areas where you can look for bearing down
  on people, positively, not just as a negative thing.
                              Mr Hancock
        183.     We are just coming on to that.  I have got a brief question
  at this stage on the way in which we are disposing of surplus sites.  In your
  previous documentation you have laid great emphasis on trying to bring your
  activities on to large core sites, so freeing up other sites for disposal. 
  The policy there is that only in "exceptional circumstances" would these be
  offered to public bodies or local authorities; in the main you are going for
  the maximum gain.  I would be interested to know whether you see that as a
  significant change of policy.  I would also be interested to know whether or
  not you think that that policy conflicts with the Government's intention of
  trying to exercise some environmental control over disposal of their own land
  so as to influence what happens on it.  The contradiction there, surely, is,
  is the environmental benefit outweighed by the financial gain to you, and how
  do you balance that?  Who makes that decision?  Who makes the judgment?  The
  final question is: are you using any of the money you get from the estate
  specifically targeted to improve the existing estate?  We have been told by
  experts who have given evidence before us that at Aldershot, for example, just
  to improve the overall accommodation for young soldiers will take 10 years to
  bring it up to an acceptable level.  One could argue, and they would, that
  some of that resource you are getting from the disposal should be specifically
  targeted to improve what you are intending to keep.  If that is so, where is
  that documented and what proportion of it is in the programme?
        (Mr Hoon)   Let me try and start at the beginning of your first question,
  because I think, actually, that will answer most of your concerns.  Clearly,
  it is in our interest and in the interests therefore of all those who work
  directly and indirectly for the Ministry of Defence that we maximise the
  return on the disposal of surplus sites.  That is not to say that we will
  always look to the very highest price, we will certainly take account of other
  factors - Government policy elsewhere and environmental issues and so on -
  but, nevertheless, I think it is fair to say that you would have to persuade
  me quite hard if you were objecting to the policy that we should not try and
  maximise the return for the Ministry of Defence.  In doing so, it does then
  increase the resources that we have to be able to do precisely the things you
  are encouraging us to do.  I do not entirely accept the suggestion that it
  would take 10 years to improve accommodation.  We have, for example, very
  recently put in some accommodation at Northwood, which was done in a very
  short space of time because the kind of modern system building techniques that
  are available I, personally, think are perfect for the kind of single
  accommodation that is largely deficient.  I want us to be rather more
  demanding than you are suggesting in terms of improving single living
        184.     We are more demanding.  I thought it was you who were not
  being more demanding, because the experts were telling us it was the MoD who
  were dragging their feet.  Presumably, you are the MoD for the purposes of
  Parliament and if you are not dragging your feet who is?
        (Mr Hoon)   I have made clear to you on previous occasions that
  accommodation is an important priority as far as I am concerned, and therefore
  it is an important priority for the Ministry of Defence.  A great deal of
  effort is being made in this spending round in order to secure resources to
  improve accommodation.
        185.     Can you then just explain the "exceptional circumstances"? 
  Who would have to make that decision?  Would that be down to you?
        (Mr Hoon)   Ultimately, yes, but, as I say, these are matters that we
  look at pragmatically.  I think it is fair to say that my approach is that I
  would expect to look to the maximum return for the department of any
  particular sale, unless there were compelling reasons otherwise.  You
  indicated some of those potentially compelling reasons, they might well be
  wider Government policy, they might be environmental concerns, or there might
  be specific reasons for making a contribution to other areas of the country's
  life, but I have to be persuaded that that was justifiable because in taking
  such a decision I would inevitably be depriving the Ministry of Defence of
  resources that would otherwise be spent on defence.
        186.     I entirely understand that.  Is it possible for you to let us
  have a look at the guidelines that you use to dispose of sites and how the
  judgments are made?  I would also like the answer to the question about the
  proportion of the assets sold and the way in which the proportion of that
  money is actually reinvested in the estate as a pre-determined policy.  If
  that is the case, where does that feature in any of the reports that we have
  so far seen?
        (Mr Hoon)   All I say is that it is not a pre-determined policy.  It
  would not be sensible to have such a pre-determined policy because asset
  sales, for example, are inevitably going to fluctuate year on year, according
  to the particular sites that become available.  There cannot be a fixed amount
  because it will depend on all sorts of factors quite outside our control - the
  property market being the most obvious one.  Equally, it also follows that it
  will depend on where those sites are and when they are available for sale,
  because clearly a Central London site is going to realise an enormous amount
  of money compared to some of our remote rural sites, where, frankly, the only
  use may well be for housing, and only then if a local authority judges it
  appropriate.  It may be that, in fact, some of the rural sites cannot be used
  for any purpose at all because of planning restrictions.  So the amount that
  that is likely to realise will be very modest compared to a Central London
  site.  If we have a big Central London site that appears in our accounts for
  any given year it would be foolish to say that that was a pre-determined way
  of making those spending allocations.  Again, the accounting officer may know
  a bit more.
        (Mr Tebbit) I would only add one or two points.  Firstly, the
  decisions on disposals of estate are taken jointly by the budget-holders who
  own their land (there are 11 top budget-holders) and by our estates
  organisation chief executive, who clearly has an incentive to maximise asset
  use.  We get better incentives because with the introduction of resource
  accounting and budgeting there is a capital charge and depreciation on this,
  the budget-holder is paying 6 per cent year on the valuation of his estate and
  therefore he has incentive to get rid of stuff otherwise.  Quite apart from
  the central policy directions about this, we have targets, as you know, of
  700 million worth of asset sales over the four-year period, and we are on
  track for that.  We do not apply those simply to single living accommodation,
  it goes across the whole of the budget, and the estate, of course, is all of
  our operations as well as just housing.  So we do not have a fixed figure, but
  I would be very surprised if the budget the Secretary of State tells me to
  implement next month does not include a seriously large hike in the amount of
  money we devote to single living accommodation.  We are also looking at better
  ways of spending money wisely through prime contracting, through grouping and
  bulking our contracts to get a bit of value for money, along best practice
        Mr Hancock: That is good news.
        187.     What still rankles, Secretary of State, is that the Treasury
  took 1.5 billion over the sale of housing to Nomura.  Perhaps we should claw
  some more of that back.  When you see the size of the problem and the amount
  of money that the Treasury got and the amount that is being handed back, there
  is a good source of funding to improve the housing estate.
        (Mr Hoon)     You tempt me to make a cheap political point about who is
  responsible for that!
        188.     Have you found the agency structure inside the MoD provides
  you with useful management information on cost generation and so on?
        (Mr Hoon)     What is impressive about the agency structure is it does
  give, in particular, organisations an identity that allows them then to manage
  their activity more effectively than perhaps would be the case if they were
  part of a very large organisation like the Ministry of Defence.   I have tried
  to visit a number of the agencies, although there are now 37 of them so we
  have a considerable number, in order both to understand what they do and how
  they do it but also to get a sense of whether we are demanding enough of them,
  and I have been very impressed by what I have found.  The fact they have the
  ability to manage their own affairs has given them a sense of purpose and
  direction that I suspect they might not have had as part of a much larger
        189.     You would expect that and I would too, but do you really
  believe they are delivering the goods in the way you would have expected? 
  This  government did not introduce the system, of course, but do you believe
  it is delivering the goods that the previous government thought it would?
        (Mr Hoon)     Having to put myself in the position of a Conservative
  minister is a strain that I will not ask of myself but all I would say is that
  I came to this somewhat sceptical.   The Labour party had not necessarily
  enthusiastically endorsed the concept of agencies and, therefore, coming into
  government I was keen to see whether they would work or not.  As I indicated
  to you earlier, I am prepared to recognise that giving this kind of identity
  to particular government functions and activities has been a success because
  it has given the people who work in those agencies a real sense of ownership
  of their own activities in a way that would not otherwise have been the case. 
   That has meant that, in a sense, they also are able to look outwards with
  more confidence than perhaps they would otherwise, winning business away from
  their traditional sources of work.
        190.     Are they as accountable to you as they would have been if
  they had been departments or sections of departments?
        (Mr Hoon)     Ultimately yes, because  ultimately they are responsible to
  the Ministry of Defence, and I think the test of this is that you as a member
  of Parliament can ask me as Secretary of State a question and demand,
  ultimately, that I give you an answer.   Now, in the process it may well be
  that you get an answer in the first place from the agency but the likelihood
  is that you will get far more detail from that process than you would by
  simply asking a Secretary of State a question across the whole range of
  activity.   I think a good test of accountability, therefore, is the extent
  to which a member of Parliament can get information about that particular
        191.     Do you intend to expand the number of agencies or contract
  them or remain the same?
        (Mr Hoon)    We have actually reduced the number in recent times.   I
  gave you the figure of 37:  there were at one stage 44 agencies within the
  Ministry of Defence, and that is partly because we have looked at,
  particularly in the logistics area, better ways of organising delivery. 
  Particularly in logistics in the past we had tended to see vertical
  organisation of the agencies but in a sense what we have now with the DLO is
  a much more horizontal approach looking right across the department at  common
  functions, particularly between the three services, to try and find ways of
  organising their work more efficiently.  That really explains the reduction
  in the number.   All I would say is that I judge these areas pragmatically. 
   It seems to me that we should not be approaching the concept of agency on
  anything other than a "Does it work?" basis and, if it does work, then I have
  no idealogical objection to it.
        192.     I think your eulogy of agencies will form the basis of my
  first question to the Baroness, and simply add "Why then flog on?"
        (Mr Hoon)    And I am sure in your normal very fair way you will also say
  I used a pragmatic test to determine my approach to it.
        Chairman:   We have yet to be exposed to the pragmatism; we know what the
  financial arguments are.   One topic we are all vying to ask concerns defence
  medical services and there the government cannot have all of the blame.  One
  of the best reports this Committee ever produced was in the period of the last
  government on the demolition of defence costs studies 15, and the
  consequential catastrophic decline of the defence medical services.   Laura
  Moffatt, who knows a thing or two  about changing bedpans, will add her
  professional experience to this question.
                             Laura Moffatt
        193.     Secretary of State, you said earlier - and I totally agree
  with you - that one of the areas where we can look to share our capabilities
  with other nations is in defence medical services.   When we go abroad and see
  our units working together, if there is a common language then, on the whole,
  it is about health and medicine, so I think it is an area that we can usefully
  exploit.   I do have to say that I completely and utterly agree with the way
  in which this government has tackled the issue of defence medical services and
  I believe that we have the right ethos now to develop the service but - and
  there is a "but"; of course - as somebody who has worked in the health service
  for 25 years, you can create structures and provide equipment reasonably
  easily, but the difficult part is making sure you have the people with the
  skills and the expertise to be able to take advantage of that.   We have a
  really good structure and a way forward with the centre for defence medicine
  and with the MDHUs, which I believe are functioning extremely well, but it is
  the same problem as in the health service -  getting the people in place to
  do those jobs.
        (Mr Hoon)     I do not particularly disagree with that; I would simply,
  though, invite you to recognise that there is a connection between structures
  and people --
        194.     I did.
        (Mr Hoon)     -- particularly in medicine because one of the problems,
  not simply for defence but for the National Health Service in general, is
  ensuring that the structures are of, for example, an appropriate size - and
  this has been a particular difficulty for us in terms of both recruitment and
  retention - so that doctors and consultants, for example, can maintain the
  necessary professional standards in order to be able to continue to practise
  in particular disciplines.   It is not simply a problem of defence medical
  services but for the National Health Service generally.   It does mean, for
  example, and I certainly have to face this problem in my constituency and I
  am sure the same is true of many colleagues, that smaller structures do pose
  difficulties in terms of retaining particular kinds of skills because, if
  doctors or consultants are not gaining sufficient experience in particular
  disciplines, then they will lose their professional  accreditation and
  necessarily want to move.   In a sense that is a problem we have had to face
  up to in defence medical services as much as the National Health Service will
        195.     I completely agree and I am going through that pain in
  Crawley at the moment about not having accreditation for particular
  specialties. Moving on from that point and referring back to the performance
  report, it clearly indicates that you feel that we are on course to be able
  to solve many of these problems.   Is the evidence there to say that we are
  on course?
        (Mr Hoon)    You have taken a far more optimistic interpretation of what
  we put in the report than we have!
        196.     It does say "on course", "on course", "on course"?
        (Mr Hoon)    "On course" but I would say that there is still a lot to do. 
   I am not pretending that there is anything other than a great deal of effort
  that has to be made in order to deliver effective medical services, so we are
  starting from a very low base.   There have been some signs that measures
  taken in very recent times are beginning to be successful but I would want to
  see sustained  improvement over a number of years before I am confident of
  being able to say to you that there are the kind of medical services available
  to the armed forces that I would like to see.
        197.     And I think we would have loved to have seen a starred bit
  below this that says "The Secretary of State says that we are nearly there but
  not quite yet"?
        (Mr Tebbit)   I would add that last time when I was here I said I
  thought we had stabilised and were beginning to make a bit of a difference.
  We did check the figures after that and it is very small beer and not enough
  but we have managed to increase the trained defence medical services strength
  over the last year by 74.   It is by no means enough but have turned the
  corner, and on the TA we had 200 professionally qualified people moving into
  the TA last year, its first year, and now we are moving into the second year. 
   It is by no means enough but it is a mark of the efforts that we are making
  and at least it is encouraging people.   They are seeing it getting a little
  bit better than it was; they can see a trend.
        198.     Further on in that same report, in paragraph 72, you speak of
  the new fast  track system for referral for serving personnel and that is down
  as "achieved".   I wonder what measures you took to make sure that that
  happened and is achieved?
        (Mr Tebbit)   In detail, we have taken contracts with particular
  institutions - I cannot remember which ones now - to make sure we can get them
        199.     Could you write to us about it and let us know?
        (Mr Tebbit)   Yes.
        200.     We were very pessimistic when we said some years ago that we
  could sense the decline of the defence medical services and that we doubted
  whether it would ever recover, so somewhere between that pessimism and Laura's
  optimism you think we are nearer one side of the continuum than the depressing
        (Mr Hoon)     All I would say, using Kevin's phrase, is that I believe we
  have turned the corner; that the measures we have taken are beginning to show
  some signs of improvement, but I want to see those signs of improvement
  sustained year-on-year rather than as a result of a single year's statistics.
                               Dr Lewis
        201.     Our own Joint Rapid Reaction Force is presumably our major
  tool for dealing with the shift towards an expeditionary strategy.   In your
  performance report, you conceded that the achievement of its full operational
  capability has been delayed "due to exceptional level of operational
  commitments", but in the defence policy 2001 document that we have just seen
  today it says  "there is no sign that operational demands are likely to
  diminish".  In other words, presumably we are going to stay at this
  exceptional level of commitment for some time.   Does the slippage in this
  target for the operational capability of the Joint Rapid Reaction Force not
  suggest to you that the MoD is operating too close to the margins in being
  able to generate deployable forces?
        (Mr Hoon)     It is undoubtedly a risk. I accepted almost all of what you
  said until your very final observation because, clearly, we have to maintain
  an appropriate balance between training, exercising, preparation for
  operations and conducting operations but, as I think I have said to the
  Committee before, there is no point in having training and exercising if we
  are not in a position to use the armed forces who are trained and  exercised. 
  The reality is, and the explanation is given in the report, that we have not
  been able to move quite as quickly as we would have liked in relation to the
  Joint Rapid Reaction Force simply because of Kosovo and, to a lesser extent,
  Sierra Leone, because we are achieving with the capability that we have.   Now
  I accept that there is a need for careful judgment about the extent to which
  we commit ourselves to operations and, therefore, run the risk of neglecting
  appropriate training and exercising and I assure you the Chiefs of Staff are
  very conscious about that and give me regular advice on that, but I am equally
  confident at the moment that we have the balance right but we continue to
  address this very carefully.
        202.     You have pointed out repeatedly in written answers to written
  questions of mine that the proposed new European Rapid Reaction Force is not
  a standing force and, therefore, would call on contingency forces from the
  contributing countries.   Presumably the type of forces that would be called
  on for some sort of operation involving the European Rapid Reaction Force
  would be precisely the same as those that we are hoping to allocate to our own
  Joint Rapid Reaction Force.  What would the effect then be on reaching our
  targets with the Joint Rapid Reaction Force if we found that a problem arose
  where we wanted to deploy forces under that label but that we did not have the
  forces to deploy because they had been drawn away for the European Rapid
  Reaction Force?
        (Mr Hoon)     I have equally made clear to you on a number of occasions,
  both in answer to written questions and at question time in Parliament, that
  we only have one set of armed forces and we can only use that on a single
  occasion, if they were all to be deployed.   I have made it clear that, in
  relation to specific decisions about the deployment of British forces, that
  decision would ultimately be taken by the British Prime Minister in the light
  of the degree of commitments that we had at the time. That, really, is a
  complete answer to your question because the labels that we give to the
  organisations will depend on particular circumstances, and I would invite you
  to be a little more flexible in your imagination because what we are doing are
  designating capabilities.   Having designated a capability, we are not putting
  that capability in a corner and saying, "That is what that particular  group
  of the armed forces will be doing".   That applies equally well to the JRRF
  where we are looking at developing a pool of capability from which we would
  draw for particular operations but it is the way in which that capability is
  used that is important, and that applies equally well to the headline goal and
  whatever forces might conceivably be used by the European Union in the event
  of NATO not being engaged.
        Dr Lewis:   I only wish I could restrain my imagination when I come to
  consider the disastrous scenarios that could come out of the European Rapid
  Reaction Force, but I will just content myself with this:  in trying to assess
  the competing priorities which could arise between demands made on what we
  hope will be a standing Joint Rapid Reaction Force of our own and demands made
  indirectly on those same forces by this commitment to second forces to a
  European Rapid Reaction Force, would the reconciling of those competing
  demands not have been a lot easier if the European aspect had been kept within
  the NATO structure and not placed outside it?
        203.     You will have ample opportunity to answer the same question
  on 7 March  so could you just be brief and give a more complete answer when
  he asks it next time you come - and the time after, and the time after!
        (Mr Hoon)     I think that it would help enormously to put on one side
  this word "standing", because that is the key to the difficulty in imagination
  that I think you have.   We are not training people to stand waiting for
  operations. We have a range of people available at different levels of notice
  with different abilities to do particular jobs and, providing they are trained
  for that purpose, then they do not have to be put in a box in a corner marked
  "Do not open until we need it".   They are busy all the time and what we are
  doing is developing a capability, which can then be used.   If we do not train
  for it, we cannot use it but, as I said to you, it can only be used once and
  we would have to make an appropriate judgment - as we do day in day out -
  about the resources we have available to satisfy particular tasks whether they
  are NATO tasks, European Union tasks, United Nations tasks or, frankly,
  notwithstanding all of the assessments we have made, whether one day there is
  a direct threat to the territory of the UK.   We have to have that flexibility
  and part of what we  are training for is to have that flexibility available
  to the United Kingdom.
        204.     Thank you for taking along two of our colleagues with you
  when you went to Sierra Leone; I am sure it was a very interesting experience. 
   Turning to another group of malevolent pupils, the Treasury, how has the
  Treasury setting of public service agreement targets sharpened your
  performance management?    I am not comparing the Revolution of the United
  Front with the Treasury - it would be a bit unfair on the RUF in some
        (Mr Hoon)     Can I say in the first place that obviously the setting of
  targets has been important right across government, but I think it is right
  to say that government as a whole recognises that perhaps we should not have
  too many targets for each department and there has been a determined effort
  to focus on key elements.   As far as defence is concerned, the performance
  targets have been built on in the light of achievements that we wanted in any
  event and, therefore, in a sense it is early days yet - we have just been
  discussing the Joint Rapid Reaction Force - to see whether there will be a
  close correlation between the setting of those  targets and our ability to
  achieve them within appropriate timescales.   Reducing the number of targets
  for government is sensible because it does allow departments to concentrate
  on what is important rather than satisfying a whole range of different
        205.     Will that put the relationship between the Treasury and the
  MoD on a slightly different basis?    Will the Treasury adopt a more arm's
  length approach generally, or just in one area of setting for public service
        (Mr Hoon)    The targets are set after negotiation and discussion with
  individual departments and clearly we emphasise to the Treasury and government
  in a wider sense the importance of setting realistic and achievable targets
  that are consistent with the overall direction of policy for the Ministry of
  Defence.  These are not targets that appear from out of the ether:  they are
  targets that are discussed vigorously between government departments.
        206.     The Treasury and Civil Service Committee in its report was
  recently critical of the overbearing influence of the Treasury on government
  departments.   Would you share that view?
        (Mr Hoon)    No, I would not and certainly not as far  as the Ministry of
  Defence is concerned.
        207.     You believe that?
        (Mr Hoon)    I am absolutely confident; I think you would have to show
  some basis for your proposition.   Clearly the Treasury, quite rightly, takes
  a close interest in the amount of money available to the Ministry of Defence;
  I am delighted to say that they took sufficient interest to recognise that
  there should be more money available to defence over the next three years, and
  I am delighted about that.   They clearly take an interest in major policy
  decisions that are taken by all government departments but I have no sense
  that the Treasury in any way interferes in the decisions taken by the Ministry
  of Defence.
        (Mr Tebbit)   I would only add that the Treasury are sincerely trying
  to move to a more strategic way of managing their relationships with
  departments, and these public service agreements are a manifestation of that
  and they are in negotiation between Treasury and the department which was
  doing it anyway.   Our Strategic Defence Review made it much easier for us to
  have key targets that we were doing anywhere; basically that is how they have
  been articulated.   I would also say, however, we do  spend 25-23 million a
  year; we have an asset base of 67 billion and it is right for us to be under
  pressure and for us to have that pressure that we transfer to our own staff
  to use our money as efficiently and effectively as we possibly can and, to the
  extent that the Treasury might be regarded as overbearing, I am also
  overbearing on the department as the accounting officer in making sure we
  spend money wisely.   Prioritisation and efficiency is terribly important in
  the Ministry of Defence; the public expects it.   So I do not mind when the
  Treasury sometimes interferes.
        208.     They are not trying to second-guess you or instruct you on
        (Mr Tebbit)  There is less micro-management on policies for the
  Secretary of State.
        (Mr Hoon)     I have no sense of being interfered with.
        Chairman:   I think we had better move on!
                                Mr Cann
        209.     We understood when smart procurement was introduced, which we
  all agree with, that we were going to make a 2 billion saving in defence
  equipment.   It now appears that most of the savings - maybe all, I do not
  know - will be made by  just shifting back into another timeframe.   I would
  call that either a cut or a slippage.   Which would you call it?
        (Mr Hoon)     It is simply not true. Could I emphasise that the biggest
  problem we face in managing resources today is the result of the success of
  smart procurement because in the past it is undoubtedly right to say that one
  of the ways in which the Ministry of Defence has managed its year-on-year
  account is by being able to slip payments into the next year, simply because
  industry was not in a position to be able to deliver on what it had said it
  would deliver.   Smart procurement now means that, in fact, industry is
  delivering to time and, therefore, understandably expects to be paid.  That
  ability, therefore, that was once exploited by successive permanent
  under-secretaries in managing accounts from year to year is much less
  available.  I am determined it should remain so, because it does underpin the
  confidence that both the department and industry have in the success of smart
        210.     But you your document DARC27, paragraph 8.3, talks of
  removing from projected project costings 2 billion which was otherwise
  planned to  be incurred over the next ten years?
        (Mr Hoon)    But that is precisely because we are able to make savings in
  the process.   One of the consequences of delays in equipment being available
  is that the cost tends to rise, so the earlier you take delivery, generally
  speaking, the lower the cost and that is the way in which, in part at any
  rate, we have been able to identify the 2 billion savings.   There are other
  ways as well because the teamwork in process means that the teams have been
  able to identify savings in the through-life cost of the equipment.  Again,
  in parenthesis, that is why we tend now to talk about "smart acquisition"
  rather than "smart procurement" because one of the areas we can make
  significant savings is in the way in which we utilise the equipment once it
  has been procured.   So the 2 billion is a real, net saving over that ten
  year period of amounts that we would otherwise have had to spend had we not
  adopted this different process.
        211.     So could Mr Tebbit produce us, then, a list of where the 2
  billion savings have come from?
        (Mr Tebbit)   No, I cannot.  The reason I will not do it is not
  because I am trying to be  devious but because ministers still have to take
  decisions on a large number of those projects because it is a ten-year period.
        212.     So we have not made the savings?
        (Mr Tebbit)  No, these are plans.   I as an official have to plan a
  defence programme over ten years.
        (Mr Hoon)     And longer.
        (Mr Tebbit)   But that 2 billion is the net change to the cost of
  projects over ten years - not by just shifting it by 15 years - which we
  attribute to smart procurement principles.   It does not mean the programme
  has got 2 billion pounds cheaper because it has given us headroom to put
  other elements in.   Ministers take decisions on individual projects at
  particular points, and these are plans, not all absolutely committed projects.
  The Secretary of State will need to take decisions as we go through that
  ten-year period and until he does I cannot say to you "This is going to
  happen" because that would be pre-empting political decisions.   I can give
  you some comfort in other areas, however.   We have other targets which
  involve 750 million over three years, 2001-2004 and that is a very exacting
        213.     What is that on?
        (Mr Tebbit)  That is the same - positive action in the programme but
  in a much shorter timeframe.
        (Mr Hoon)     I had some difficulty on this when I was first appointed
  and, if I can go through the learning process, most government departments
  spend a particular amount of money in a given year on a particular project,
  and that is an end to it.   Our budget is three-dimensional in the sense that
  if we are talking about, say, Eurofighter, if I say that Eurofighter is
  affordable - which it is - I have to say it is affordable not only this year,
  but next, and for every year we are planning to be able to operate
  Eurofighter.   There are going to be very significant peaks and troughs in a
  profile over a long period of time.   For example, it may well be that I am
  talking about savings in this case in year ten of a budget, because in year
  ten it may well be at that point that I have a significant cost of maintenance
        214.     In year ten, of course, you will not be in this post, and nor
  will Mr Tebbit!
        (Mr Hoon)     Leaving aside those projections, the reality is that we
  have got to agree budgets today that are sufficiently robust to  deal with
  year ten.   I cannot agree to a project today that I know full well is
  unaffordable in ten years' time, but it follows from that that there may well
  be opportunities in year ten to make savings, and that is part of what we are
  looking at. For example, in the long life of a project like Eurofighter it may
  well be that I can project forward savings on maintenance.   We are not
  spending enormous amounts on maintenance today because we have not got
  enormous numbers of aircraft in service, but that will obviously increase as
  the aircraft comes into service and many more are available.   If I can
  negotiate today agreements as a result of a different way of working through
  smart procurement that says that in ten years' time the projected cost of
  maintenance is going to be reduced, that is a perfectly proper saving that we
  can claim credit for because it is the result of the system.  It is important,
  therefore, not to see this in terms of a single snapshot about this year's
  accounts, but to project forward.
        215.     I accept all that and I do not have any problem with it, but
  somebody has put 2 billion down as what we are going to save through this
  system.   You cannot quantify it; Mr Tebbit  cannot; I cannot; even the
  Chairman cannot, and yet it is set down here.   Now, if it were to be said
  that it may vary by this, that or the other, then I think we would know where
  we are.
        (Mr Hoon)     What Kevin has said to you is completely accurate, and the
  statement is accurate, and what he is saying is that there are projected
  savings of 2 billion over that ten-year period that could be available to the
  Ministry of Defence should we continue --
        216.     Could and should?
        (Mr Hoon)    Yes -- with this process.   Now if, at a certain stage in
  the process, I or my successors judge that this particular aspect of the
  saving is not a good idea for wider policy reasons, then what the permanent
  secretary would say to me at that stage is, "Fine, Minister, you are entitled
  to take that policy decision but you must bear in mind that there are certain
  risks to your budget in taking that decision".   It might well be that that
  policy decision was so important to the minister at time that he or she would
  then choose something different and there would have to be savings made
  elsewhere to come within budget or, alternatively, we would have to persuade
  the then Chancellor of the Exchequer  that this was justified and required
  extra spending for the Ministry of Defence.   All we are saying, however, is
  that if we continue with the present policy we can expect to secure savings
  of 2 billion over that ten-year period and that there are reasonable
  expectations that that can be done.
        (Mr Tebbit)   We can also give you a more specific promise than this. 
   We are taking all of our projects worth more than 100 million - of which
  there are about 100 - which means we will be expanding our detailed tracking
  beyond the thirty odd major projects we currently track, and we will be
  tracking those on an annual basis for time, quality and cost.  That
  information will be made available as we go through our programmes so you will
  be able to see how much better the Ministry of Defence is getting at bringing
  projects to fruition on time and on cost, and when I say "you" I mean also the
  Public Accounts Committee.  In other words, we are not trying to evade in any
  way or cheat in any way; we have no reason to.
        217.     Nobody is accusing you of that.
        (Mr Tebbit)   I can assure you that I am already finding how well this
  is working because  there is already pressure in the budget within the
  equipment programme because equipment is now arriving to time and cost.  It
  is getting very difficult because we used to rely on good old-fashioned
  slippages where we would expect to spend 100 million this year and we would
  only get bills for 80 million because of the relative efficiencies of
  industry and the Ministry of Defence.  Now we get the 100 million; it is
  already happening.   In all sorts of ways, therefore, we know that the
  performance is improving.  This 2 billion is absolutely real but it is a
  planning figure.   You will have much more detailed information and Sir Robert
  Walmsley is putting this in place as I speak on our 100 major projects.
        218.     It is not a planned figure; it is an aspiration figure.
        (Mr Tebbit)   That is what plans are, but they are a bit better than
        Chairman:   We must move on to defence diplomacy.
                              Mr Hancock
        219.     Before I ask some questions on defence diplomacy may I ask
  this, finally, on smart procurement, because I do think it is a bit of  a scam
  and I think the 2 billion is a bit of a scam because you cannot quantify it
  and nor can we. There has to be a downside to smart procurement and you put
  your finger on it when you talked about Eurofighter and the maintenance cost. 
   It is a bit like buying ships; if you buy ships on a smart procurement
  programme, the first ship is undoubtedly not going to be the same as the last
  ship.  If you buy well upfront you are not absolutely sure that the last ship
  is going to cost that much but you have agreed a price and I think the scam
  is when you get ripped off over the last part of it.
        (Mr Hoon)     Let me be absolutely clear; there is no scam and there is
  nothing wrong with this process.   The process is working and delivering.  
  Your example about ships might apply if you were buying rowing boats and you
  might well agree a single price for ten rowing boats, but we do not buy many
  rowing boats.
        220.     Are you suggesting that the Type 45, the first, is going to
  be the same as the last?
        (Mr Hoon)    No, because that will be part of the discussion and
  negotiation we have.
        (Mr Tebbit)   On the Type 45 the government has led a contract for the
  first three.  The reason it has led a contract for the first three is because
  it needs to see how the performance comes in.   This not done as a straight
  run of everything on the same price.   On the Attack helicopter, we have
  actually increased the price we are paying for the Attack helicopter by 120
  million because, in doing so, we can achieve through in-service support cost
  savings 750 million over the programme of in-service support.   Now, you will
  say to me "Prove it" and, of course, I cannot yet but we will be tracking it
  as we go, so sometimes it is worth spending to save.   That also may not look
  smart procurement if you look at it superficially but we are looking at
  whole-life costs as well as what we are doing.
        221.     Let's hope you can prove it when the time is there.   Moving
  on rapidly to defence diplomacy, you still make it very much an objective here
  and your report suggests that you have met your targets.   Is it still a
  driving force for you, Secretary of State?  Is defence diplomacy a very
  important part of the role of the Ministry of Defence?
        (Mr Hoon)     Yes, it is.  We have given it such emphasis across
  government that we have  established a pool budget with both the Foreign
  Office and the Department for International Development specifically to look
  at ways in which we can work together in a wider sense to prevent conflict
  which is obviously essential to our idea of defence diplomacy.
        222.     The budget went up by ten million in the Defence Assistance
  Fund.  Where was that extra money principally being directed?
        (Mr Hoon)     Certainly some of that money will be going to Sierra Leone
  and to West Africa. There is also a training team being established in central
  and eastern Europe.   I am sure there are other areas as well but those are
        (Mr Tebbit)   There are more defence diplomacy scholarships.
        (Mr Hatfield)    And we have established military advisers, for example,
  in Romania, Estonia and Czech Republic, and civilian defence posts in Romania
  and Poland.   All that comes from this fund.
        223.     Will those first three remain?  Is the plan to keep them
        (Mr Hatfield)    For the foreseeable future.   I am not suggesting they
  will be there in  ten years' time but I think we may even extend this to
  Poland.   We are talking to the Polish government about that now.
        224.     Finally, relating to the re-allocating of defence attachs,
  how is that working out?  When will that be completed?  What has been the
  reaction of our NATO allies to the changes there?    Some of them have borne
  the brunt of the changes.
        (Mr Hoon)     I think it is fair to say as you indicated that the process
  is not yet entirely complete and it is rather too soon to judge the reaction
  to it but this was a careful reconsideration with the benefit of advice from
  the Foreign Office of the placing of defence attachs and a lot of thought was
  put into where they should go:  we have had a net increase in posts - only by
  one but nevertheless it does demonstrate the importance with which we view
  defence attachs. I certainly find wherever I go that they play a very
  valuable role, and we want to use them to the best effect.
        225.     Will you continue the policy of using non-commissioned
  officers and warrant officers in posts as defence attachs?  I personally
  think it is  very successful.
        (Mr Hatfield)    I was in Finland last week and our deputy defence
  attach there was, indeed, a warrant officer and doing a very good job.
        226.     And is it policy to continue that as much as possible?
        (Mr Hatfield)   Yes.
        227.     What is he doing in Finland?
        (Mr Hatfield)    Finland also provides a defence attach service to
  Estonia.   Picking up the NATO point, there has been a slight reduction in the
  total number of attachs in NATO countries but all countries are still
  covered.   One of the important differences about NATO from a lot of the
  posts, say, in Africa or Eastern Europe is we have a massive relationship
  anyway going on with those countries and, especially with modern
  communications, we have found that it is often easier to work directly and
  through the organisation in Brussels, so we do not need to have the same
  numerical coverage in each post and I do not think we have any problems as a
  result of the adjustments.
                              Mr Brazier
        228.     I would like to put a quick observation on the record in
  breach of the twenty  years' tradition and say something in favour of Ministry
  of Defence officials.   I wrote my first pamphlet on through-life costing
  twelve years ago and the biggest single item blocking it then was the attitude
  of the Treasury saying, "Ah, but these savings are going to be thrown up a
  long way away and we cannot estimate them very accurately", all of which is
  true.   The work that has been done within the Ministry of Defence under the
  last government but which has been continued by this one in terms of saying,
  "Well, even if there are estimating difficulties, we must make sound decisions
  to spend a little bit more upfront in order to save further on very
  substantially", is critical for a cost-effective procurement effort, and I
  think quite a lot of credit must be taken there by the officials concerned.
        (Mr Tebbit)   That will be of great comfort to my people and I would
  like to say that we do this through integrated project teams so that even if
  people move on the team remains and the body of knowledge is captured and
  continues to be monitored.
        Mr Brazier: Yes.  I think the principle is right.
        Chairman:   I hope that pamphlet is still available in the Admiralty
                               Mr Gapes
        229.     Can I take you back to the Future Strategic Context document
  and the topical issue of National Missile Defence.   Your essay in paragraph
  89 says "The risk of air-launched weapons of mass destruction attacks will
  remain very low". In that context, do you believe that the new US
  administration shares that view and can you elaborate the government's present
  position on President Bush's National Missile Defence initiative.
        (Mr Hoon)     This is an assessment in light of our current judgment
  about the level of the threat to the United Kingdom but we recognise and
  understand that the United States has different concerns and has identified
  the emerging threat to the United States and believes that, given the
  timescale taken to deal with it, it is right that they should pursue a missile
  defence policy.
        230.     In the view of your remarks then and also paragraph 59 of the
  document which confirms the assessment which I think is absolutely correct,
  which is that the US administration and congress are going to go ahead with
  - however it comes out in  practice - something called National Missile
  Defence, do you think it would be helpful, given their commitment to
  consultation with allies, that we might propose a joint threat assessment
  within NATO and perhaps the European allies who are not in NATO as well, so
  that our perception and other NATO allies' perceptions of threat assessments
  could be put into the pool when the United States are making their own
  assessment, so that we try to come to a common view as to whether National
  Missile Defence is necessary and particularly what kind of defence measures
  would be necessary in the light of the Anti Ballistic Missile treaty, or any
  modification to it?
        (Mr Hoon)     We already do that, and that work is shared and taken
  forward together.   I am sure you are not missing the point, but the point
  about the assessment that the United States has made is that the threat that
  they perceive that they need to deal with is far closer to the United States
  than it is to the United Kingdom.  The capability, therefore, of a particular
  country to be able to deliver a missile to the United States is a much more
  direct threat to the United States at this stage than to the UK simply because
  of the distances involved.
        231.     It depends which countries you are talking about.   Iran --
        (Mr Hoon)    Let's be specific.  We are talking about North Korea.
        232.     If we are talking only about North Korea  --
        (Mr Hoon)    We are not talking only about North Korea but we are talking
  about North Korea in terms of the first stage of concern that the United
  States has.   That is the first stage of concern that they are seeking to
  address in the early period of this policy.
        233.     But if we are looking 20/30 years ahead, which is what this
  document was talking about and it is stated that it is expected that within
  that timeframe other countries will develop a capability for chemical,
  biological or nuclear armed missiles and so on, is there not an argument that,
  given the interrelationships that there are within the world and given the
  range of strategic missiles, we, the Russians, the rest of the NATO and our
  other European Union partners should all be working together with the US
  administration to get a common threat assessment.  That would be consistent
  with the strategic arms regime and the control regime  that we have and will
  avoid the problem which many of us are concerned about which is that the
  unilateral decision by an American administration, without taking account of
  those wider issues, could lead to the ending of arms control agreements on a
  global basis?
        (Mr Hoon)     The United States have made it clear, and the new
  administration has made it quite clear, that whilst they recognise the
  necessity for a missile defence system particularly to protect themselves
  against that first stage, they will do so only having consulted allies in
  NATO. That was said as recently as last Saturday by the defence secretary.
        234.     I am happy with that but I am proposing we take a proactive
  approach to try to get the involvement of our NATO allies, the Russians and
  others in this process so that we avoid it leading to a very serious breakdown
  of strategic arms agreements?
        (Mr Hoon)     But I do not see the distinction that you appear to be
  trying to draw. The United States has identified a particular threat to the
  United States and we accept that that is a serious threat which the United
  States is quite  rightly looking to defend itself against.  The reason is that
  North Korea simply is nearer to the United States than to the United Kingdom.
  Moreover, they appear to be more willing to use the capability than might be
  the case in respect of other countries because threats are a combination both
  of ability to deliver as well as a willingness to use.  We simply judge that,
  at today's state of knowledge, there is not a country that has both the
  ability to deliver and the intention as far as the United Kingdom is
  concerned, and that inevitably means that whilst we can share assessment of
  threats  - and I made quite clear we perfectly well understand why the United
  States reached its conclusion - it does not necessarily mean that because
  different countries have different perceptions they can somehow collectively
  reach a conclusion.   If you are threatened, as the United States is, then you
  take a particular decision in the interests of the United States. Discussing
  that with Russia, whilst it has some impact, clearly, as far as global arms
  control is concerned, does not take away the threat to the United States.
        235.     But Russia is a lot closer to North  Korea than the United
        (Mr Hoon)    But that is why the second limb of a threat is important.  
  North Korea has not evinced any public intention, as far as I am aware, of
  threatening Russia but there have been occasions on which North Korea has
  expressed its reservations about the United States.
        236.     The document does not even mention North Korea, but is
  talking about a 20/30 year timeframe.
        (Mr Hoon)    But this is our document.   This is the point I am trying to
  make to you.   You are, with respect, confusing a threat to the United States
  with an assessment that we make on behalf of the United Kingdom.
        237.     I think the problem here, however, is that there is a
  strategic arms control regime. There is an Anti Ballistic Missile treaty,
  SALT, Start 1, Start 2, the comprehensive test band and all the other matters
  which come from that and the problem, if we do not have collective views
  internationally about these matters and if the American administration, having
  said it will consult, is serious about consulting, then it should be prepared
  to consult with all those involved in that process and listen to what they
  say.   If we do  not get collective threat assessments, my point is we are in
  danger of bringing down the arms control regime, and that is my concern?
        (Mr Hoon)     I think you are conflating a number of different concerns. 
   For example, you threw in, without qualification, the ABM treaty. That is a
  bilateral between Russia and the United States - we are not a party to that
  - and if the United States and Russia choose, as previously, to amend the
  terms of that treaty or if, for example, they judge together that that treaty
  has no longer any validity because the international strategic landscape has
  changed so much, then it is perfectly open to them to abandon it.
        Chairman:   We have to move on.
        Mr Gapes:   One last point: it is a bilateral treaty but if one state
  then chooses to break that treaty, you then are in the position where there
  was a deal done with SALT and the ABM treaty limiting the number of missiles
  and limiting the anti-missile systems.   If one pillar of that goes, then you
  are in danger of the whole international strategic arms control system going
  and that has been a consistent position taken by successive British
  governments over many years.  My  concern is we are in danger, if this process
  goes forward unilaterally with unilateral breach of that treaty, it could
  bring down the whole international arms control system.
        238.     That is a comment; not a question.
        (Mr Hoon)     I do think I need to say that that is a far too
  melodramatic view of the ABM treaty.   The treaty has been amended in the past
                               Mr Gapes
        239.     By agreement.
        (Mr Hoon)     Amendments tend to be by agreement, and there is no reason
  why that should not occur again in the future if the parties judge that the
  treaty has any continuing utility.   They may have come to the conclusion
  that, in fact, it does not have.
                                Mr Hood
        240.     Secretary of State, we are hearing rumours that there may be
  a shift in attitudes towards the continuance of no-fly zones over Iraq.   Is
  this the case, and can you set out the UK's present position?
        (Mr Hoon)     We judge that the no-fly zones continue to be justifiable
  for humanitarian reasons; in particular we remain concerned about the threats
  that Saddam Hussein poses to the people who  live on the ground under the
  no-fly zones and we will continue our policy of protecting those people on
  humanitarian grounds.
        241.     When the Committee was in the Gulf last year we picked up a
  concern about the continuation of the no-fly zones and what was happening with
  the relationship with Iraq, and there was a concern being expressed, not
  upfront but in other circles, about the fact that there was no light at the
  end of the tunnel; that they were continuing and there was no movement, so
  much so that we heard that Kuwait was organising a conference of all Arab
  states to discuss it.   That was a year ago and now we have rumours that there
  is a weakening of support for no-fly zones.   How are we responding to that? 
  Are we just high-balling it and saying "Well, we will just carry on"?
        (Mr Hoon)     We are not but, at the same time, I think it is important
  to put the views of the international community into the appropriate context,
  and the context is Security Council resolution 1284.   This was negotiated
  after many months - I suspect it seemed like years at the time  - of
  determined effort in the United Nations to establish a process that was on
  offer to Iraq to  Saddam Hussein by which there could be, to use your phrase,
  light at the end of the tunnel.   There was - and continues to be - an
  opportunity for Saddam Hussein to accept the will of the international
  community, an agreed Security Council resolution, whereby if he allows
  appropriate inspection of facilities in Iraq then there can be a progressive
  lifting of sanctions.   Clearly, in such circumstances, there could well be
  then a series of discussions with the regime that would have beneficial
  effects as far as the people of Iraq are concerned, but we must have
  overriding concern for the people on the ground in the northern and southern
  no-fly zone whom we are protecting.
                               Dr Lewis
        242.     May I add my personal thanks, and I am sure that of Mr Gapes,
  for the hospitality you extended to us when we accompanied you to Sierra Leone
  last week and in particular for the extent to which you involved us in parts
  of your programme that you need not have done.   This was greatly appreciated. 
   The Permanent Secretary and others told us on 17 January that Sierra Leone
  was providing a kind of dry run for the way in which the new
  conflict-prevention, cross-cutting budget would be used.   If the champions
  of this new type of  budget are vindicated, it is going to change the way in
  which the Ministry thinks about applying UK resources to trouble spots.   How
  do you feel this conceptual approach is working in Sierra Leone at the present
        (Mr Hoon)     I do not think it just applies to Sierra Leone but to a
  number of other areas.   One of the key lessons learned from Kosovo was that
  it is not simply enough to have extremely effective military capability that
  prevents humanitarian catastrophe; you also have to have the people that you
  can then put into a place like Kosovo.  The civil administration was
  completely shattered, not only as a result of the conflict but over many years
  of totalitarian rule and, in those circumstances, I recognised that we needed
  access to all sorts of skill.  That is still the case as well in Sierra Leone
  because, as you saw, what the British army are capable of doing certainly is
  to train the Sierra Leonean army to behave in a lawful, constitutionally
  respectable way with the military skills that go with that but allied to that
  will be the need for policing, for example, as well as other governmental
  skills that will be required once the country responds to the lawful
  expectations of  a democratically-elected government.   What I see very much
  about the conflict prevention fund in a sense is that, once the purely
  military aspect has been completed, then we need to recognise that there will
  be other issues down the track that have to follow behind.   It may well be
  that those are taking place simultaneously as the military solution is taken
        243.     Briefly, on that further point you have raised, I know that
  Mr Gapes and I were both very affected by what we saw on one bit of the visit
  where our programme was diverged from yours when we visited the amputee camp,
  where there were no fewer than 226 people ranging from a toddler of 13 months
  to breadwinners for families who had had either one or both hands cut off by
  the RUF. Is there any way in which you can see the Ministry of Defence
  co-operating with the DFID to target some specific assistance, either now or
  in perhaps a happier phase of development when the military project has gone
  further on that peculiarly horrifying aspect of the war?
        (Mr Hoon)    In the first place, what we do is designed to deal with the
  intimidation that that kind of appalling behaviour was about.   Clearly,  the
  attacks were appalling for the individuals but they were designed to
  intimidate.   They were about ensuring that the rest of the population
  realised what these people were capable of and, by training the army, we are
  giving the government of Sierra Leone the opportunity of saying to its
  population that they will not suffer those kinds of attacks. When we did visit
  Mashiaka, for example, we all saw the benefits of that in terms of an area
  that had previously been controlled by a rebel group now being repopulated by
  its original population, with people going about their lives and getting on
  with business free from the sort of intimidation that you saw at the amputee
  camp.   It is part of what we do as much as, say, what DFID and other
  government departments might do in terms of granting financial or other
  assistance.   Certainly, however, I see this as part of a joined-up process. 
   I do not think we should be seeking to separate out the different elements. 
   When we look at projects in the conflict prevention fund, we will be looking
  at ways in which we can work together to deliver a conclusion.   It follows
  that there is no point in training the Sierra Leonean army to control the
  territory of Sierra Leone if we then do not put in  place, or help to put in
  place either, the civil administration that allows the government to govern.
                               Mr Gapes
        244.     Can I, first of all, agree and thank both yourself and your
  officials and Brigadier Riley and all the military people we met.   I was
  really struck by how competent and how caring our people are in Sierra Leone,
  and we are making a difference - it is quite clear.   You can see the mood of
  the people and there is a general sense that it is getting better, and I am
  very glad I was able to see that.   We are doing a job and we have just
  extended the period for the military short-term training mission until
  September and, obviously, I am not asking you to give years and dates but how
  long do you think we will need to maintain our forces with a presence in
  Sierra Leone?
        (Mr Hoon)     I agreed to the extension of the training because those
  responsible for the training came forward with specific reasons as to why we
  should carry on, both in terms of training more people but crucially to give
  those individual soldiers who have received basic military training the
  ability to work in units.  The advice I received was to the effect that,
  whilst we had trained a good  number of people who would be useful
  individually, they lack the kinds of skills that organised units require if
  they are taken to occupied ground which, ultimately, we assume the President
  of Sierra Leone will want to do.   So that was a specific justification for
  extending the training teams and obviously I remain open to those sorts of
  arguments.   Equally, in the light of all the comments this Committee has made
  today and the very practical considerations, I also have to recognise there
  is a limit to that.   I cannot put a date on it because it would not be
  sensible at this stage to do so.  I think it is clear from what we saw in
  Sierra Leone that we are moving towards a situation, and we saw something of
  it in Mashiaka, that those trained units can now go out into areas that were
  previously dominated by the rebels and occupy those areas and behave in a
  military way that is useful to the government.  That is a process that is
  clearly under way and we will expect to see continuing.
        245.     Clearly now the economic recovery that is beginning in
  Freetown and the children going to school normally and all the rest of the
  normalisation that is going on will require time.  The UN operation and our
  own role within Sierra Leone, both in support of the UN and directly, is
  something that we would not want to pull the plug on and then allow the rebels
  to come back.
        (Mr Hoon)   No.
        246.     Could you give an assessment of how you would judge when our
  mission has been fulfilled?
        (Mr Hoon)   Our strategy has always been to carry on after the short-term
  training teams with an international training team that will be very much
  about this kind of strategic leadership role that the government forces will
  need to develop.  In a sense we want to go beyond training individuals into
  units to make sure that the Sierra Leonean army has available to it the
  ability there itself to carry on training.  Again, there is no point in
  training thousands of soldiers if the government itself cannot continue the
  process thereafter.  That is why we always planned for the international
  training team to continue where we left off.
        247.     Can I put to you that from my point of view, having been
  there, I would say I think we should stay for as long as we are needed and not
  prematurely withdraw for other reasons.
        (Mr Hoon)   We will stay for as long as we are needed but I think it is
  important to distinguish between the need to do the training, which is what
  we are doing, and the question of security in Sierra Leone.  When you talk
  about need, we are not there to provide security other than in this indirect
  sense.  We have indicated that we would be willing and we have available an
  over-the-horizon capability, but on the ground what we are doing is training
  the forces of the Government of Sierra Leone to establish their own security,
  if I can put it that way.  That was what was encouraging about our visit
  because they are clearly demonstrating that capability.  I would not want the
  need to be in any way confused with the security need.  The need is about
  training.  That was why I was able to take the decision, because it was put
  to me that there was a need for further training.  I am confident that there
  will come a time when that need is no longer as acute.
        Mr Gapes:   I hope there is no suggestion of any premature withdrawal
  from Sierra Leone.
        Chairman:   I think if ever there is a justification for intervention
  anywhere, Sierra Leone is it.  You may say, Secretary of State, we are just
  there for training, but the psychological impact is much more than a small
  group of people undertaking training.  If ever a time comes for us to withdraw
  it has to be absolutely, as I am sure it will be, well, well thought out.  I
  am very proud of what the British forces are doing over there.  I am very sad,
  frankly, that we do not have more resources to put in more people; you judge
  the size.  Anyone who goes there will come back totally, totally committed to
  the British presence.  I just hope the United Nations can develop their skills
  commensurate with the task, but I am less confident of the latter than the
  former.  We have another 20 minutes, if that is okay.
        Mr Brazier: I am sorry if I had to drop out for a private medical
  reason at the last moment but I echo the Chairman's words. I strongly opposed
  all our interventions in the Balkans but I think Sierra Leone is a model of
  what we should be doing.  I have got a long list of rather complicated
  questions on public-private initiatives and the guidelines.  It is obviously
  a very important and complicated subject.  I am going to give you several
  questions together, if I may, for brevity.  Does the Investment Strategy's
  announcement that you are looking at ways of using PFI for war-fighting
  equipment represent a change in policy?  What criteria, whether it does or
  not, will you be applying in drawing a line beyond which PFIs will not
  venture?  There clearly has to be a line somewhere.  Thirdly ----
        248.     Shall we just take those two, they are quite close together.
        (Mr Hoon)   The line is that we will not in any way compromise military
  capability for financial reasons.  What we are trying to do is enhance our
  military capability, military effectiveness, at the same time as achieving
  value for money.  That is a test that I will apply to any proposal for using
  private finance.
                              Mr Brazier
        249.     How do you reconcile your policy of withholding public
  funding for new capital investment unless "private financing [is] shown to be
  inappropriate, unworkable or uneconomic" with your commitment to a level
  playing field between PFIs and public sector solutions?
        (Mr Hoon)   Because that is the precise approach that we adopt in
  determining whether or not a private finance solution is sensible.  It is
  entirely even-handed and we make judgments according to achieving value for
  money without in any way compromising military capability.
        250.     You do not see either having a contract heavy lift capability
  or potentially a contract Future Strategic Tanker Aircraft as compromising the
  front-line capability?  Supposing, to take the heavy lift example, you have
  a not entirely secure airfield you are operating to and problems of enforcing
  a contract where you are landing in a war zone?
        (Mr Hoon)   Part of the process that we undertake in determining the
  appropriateness of a private sector solution is to look at precisely those
  issues and they are built into the contractual arrangements.  We, for example,
  have negotiated special arrangements for the crewing of roll-on roll-off
  ferries for precisely that reason, so if those vessels had to go into war-like
  zones they would be able to do so and it would be covered in the agreement.
        251.     They would have uniformed crews?
        (Mr Hoon)   Exactly.
        252.     Military uniformed crews?
        (Mr Hoon)   They would be Sponsored Reserves, but that is part of the
  thinking.  We are not taken by surprise that when we procure military
  equipment or military services they might have to go into war.
                              Mr Brazier
        253.     That would apply to the heavy lift as well?
        (Mr Hoon)   We have not got that far, I think it is fair to say.  What we
  are looking at with heavy lift for transport aircraft is the purchase of the
  aircraft.  We have not yet got into discussions about how they will be used
  because they have not yet been constructed.
        254.     Obviously that is going to be a matter of some interest to
  the Committee given that pivotal role.
        (Mr Hoon)   The C-17s that will be available this year are military
        255.     They will have military crew?
        (Mr Hoon)   Yes.
        256.     The final question:  your Investment Strategy anticipates a
  more proactive approach to using assets in exploiting wider markets.  Do you
  anticipate a greater emphasis on PFIs to deliver it?  What do you think the
  potential is for the revenues that could be generated from these wider
        (Mr Hoon)   Is that it?
        257.     Yes.
        (Mr Hoon)   There are obvious opportunities but they vary according to
  particular areas.  We discussed agencies earlier on.  The Training Agency, for
  example, has begun to be very successful in offering training packages beyond
  employees of the Ministry of Defence and is beginning to derive some
  significant income.  I have to say that we approached that in terms of looking
  at the asset and whether it is necessary.  If we do not need that particular
  asset then clearly the solution, as we have discussed already this morning,
  is to sell it.  If, on the other hand, strategically we require a particular
  asset into the future but, for example, we cannot use it 100 per cent of the
  time for MoD purposes then we will look to using that in other ways in these
  wider opportunities that are around.  Some of those agencies will be better
  able to exploit those opportunities than others simply by reason of what they
  do.   Training is certainly an area where I think we have significant assets
  that we cannot use 100 per cent of the time and ought to derive some income
  from because in deriving that income that adds to the amount of resources we
  have available to spend on defence.
        258.     You are allowed to keep all the income under the new
  strategy, 100 per cent in house?
        (Mr Hoon)   Yes, every penny.
        Mr Brazier: That is a considerable advance.
        Mr Hood: I would like to move on to DU and veterans' welfare.  Are DU
  munitions an essential part of the Armed Forces' weapons inventory?  Are you
  looking for cost-effective alternatives to DU?
        259.     Depleted uranium.
        (Mr Hoon)   Depleted uranium shells are the most effective way of dealing
  with main battle tanks today.  That is why they will continue to be in our
  inventory unless and until we establish some other way of dealing with main
  battle tanks.  There are a number of different ways of attacking a main battle
  tank but I am sure you would not want me to ask British servicemen to put
  their lives at risk because there was a weapon available that would do the job
  and we take it out of service.
                                Mr Hood
        260.     Do you remain convinced that the risk to human health from DU
  is negligible?
        (Mr Hoon)   Yes, I do.  I spent some considerable time looking in
  particular at the statistics.  The one area of statistics that I found most
  convincing was the epidemiological evidence of those who had been deployed to
  the Gulf, around 53,000 service personnel, compared to service personnel,
  again a control group of around the same number, who were not deployed.  The
  death rates over that ten year period since the Gulf conflict are almost
  identical.  What struck me as being of great significance was the incidence
  of cancer among the control group, that is those who did not go to the Gulf,
  was actually higher marginally than the incidence of cancer among those who
  did go.  So there is not any evidence at all of any enhanced propensity to
  cancer, for example, as a result of serving in the Gulf.  That is not simply
  exposure to DU.  I think one of the interesting things about those who have
  expressed concern about so-called Gulf War Syndrome is that the causes of that
  syndrome have been changing over the period of the ten years and DU is perhaps
  just one of the more recent suggestions as to what might be the problem.
        261.     At this stage are you able to assess the response to your
  offer to provide medical testing for veterans who are concerned that they may
  be suffering some form of radiation poisoning?
        (Mr Hoon)   We already have - I have visited it and if you would like to
  go I would certainly encourage you to do the same - a unit at St Thomas'
  Hospital which is available for Gulf War veterans to go in and have their
  symptoms looked at and considered.  I was very impressed with the thoroughness
  and the amount of time that was made available to each person.  As I say, if
  you would like to go I would certainly extend that opportunity to you and you
  can see for yourselves the care with which problems are looked at.  What we
  are equally trying to do, and John Spellar made clear in the statement he made
  to the House, is to find a way of reassuring not only Gulf War veterans but
  obviously more recently those who have been to the Balkans that whatever
  symptoms they may be suffering from, if they are suffering a particular
  illness, are not related to their service.  Can I put this as best I can in
  a personal context.  Sadly, we all have experience of friends and relatives
  who suffer cancer, it is something that is far more prevalent in our society
  than we are sometimes prepared to acknowledge.  My experience of people who
  fall victim to cancer is they do not want to accept that they have been, if
  I could put it this way, unlucky, they want an explanation, they want to try
  and find a reason.  I think what has happened with many Gulf War veterans who
  have suffered cancer since their service is they want to find an explanation
  and their service gives them an explanation, but the statistics that I
  demonstrated in relation to the incidence of cancer since the Gulf War,
  particularly the fact that the control group have shown more signs of cancer
  than those who actually served, does demonstrate, I think, that this is a
  problem of the prevalence of the disease in our society rather than anything
  associated with service in the Gulf.
        262.     You seem to be convinced but there is some considerable
  evidence and strong feeling in the country that does not necessarily share
  your view, particularly in the veterans' associations.  Have you met the Gulf
  Veterans' Association to discuss it with them or have you received
  representations from them?  Are you telling us that they share your analysis
  and conclusions?
        (Mr Hoon)   There is strong feeling, I cannot dispute that, but there is
  no evidence.  That is the distinction that I would ask you to consider.  There
  is inevitably strong feeling when material appears in the newspapers of pretty
  questionable scientific and medical veracity.  I will give you just one
  illustration.  A very well respected newspaper in this country on its front
  page carried an assertion by a leading light in the Gulf War Veterans'
  campaign that almost 500 men had died since they had been to the Gulf.  He was
  right, he was absolutely right, but 500 approximately had died who had not
  been to the Gulf.  Statistically, in fact, you would expect out of a normal
  population in society that around 700 people would have died out of 53,000
  over that ten year period.  The reason why it is lower for those who have been
  in service is that they are younger and, therefore, the actuarial statistics
  are clear, there will be a smaller number.  This was reported as a front page
  story in one of our national newspapers as if it was somehow significant. 
  Nobody, neither the journalist in question nor the editor, chose to put that
  into context.  Undoubtedly there will be strong feeling.  If I had read that
  without the kind of information I am giving to the Committee now, I would have
  been alarmed by that.  If I read in a respected newspaper that 500 people have
  died since they served in the Gulf I would think that was significant, it
  sounds significant, but put into context it is not at all significant, in fact
  it is perfectly normal.  I think it is that kind of careful consideration of
  medical and scientific evidence that we all need to rely on when reaching
  conclusions, not strong feeling.  We can all have strong feelings but those
  strong feelings have got to be based on some evidence.
        263.     Mr Hoon, it is very important that you do not fall into the
  trap of your predecessors, even though the evidence may be very strong at the
  moment, that there is no correlation between exposure to depleted uranium and
  illness.  You really have to keep looking.  I would strongly, strongly advise
  you to carry on the policy that you have begun of still looking and keeping
  an open mind because the point Mr Hood mentioned is there is a scepticism of
  the medical profession and all associated with it and it is really important
  that you are seen to have a very open mind.
        (Mr Hoon)   Can I make it quite clear that I have emphasised over and
  over again, and I repeat it again to the Committee, if there is any evidence
  of an association we will look at that evidence absolutely rigorously.  I
  would invite anyone who has evidence to put that forward, but I have not seen
  any evidence to date.
        264.     The Commission has commissioned the Parliamentary Office of
  Science & Technology to trawl the evidence but it is not just a question of
  sitting back and waiting for some evidence landing on your desk, I think it
  is important that the Ministry of Defence and those associated with it are
  seen to be collaborating with the Americans and with the Italians.  I would
  be very interested to know if the story about the Italians stands up at all.
        (Mr Hoon)   It does not.  There has been very recently a conference in
  Washington where a considerable amount of the medical research and evidence
  that has so far been compiled was considered.  I think actually your family
  doctor will be able to tell you this, that one of the well-known facts about
  leukaemia, and the allegation of these two unfortunate Italian soldiers and
  whether they suffered leukaemia as a result of going to the Balkans, is that
  leukaemia takes between ten and 15 years to manifest itself after the exposure
  to a particular source.  These people had been to the Balkans but in the last
  12 months, yet that, again, did not prevent any of the national newspapers
  seizing upon this as being some highly significant story again because they
  probably did not go and ask their family doctor in what circumstances
  leukaemia shows itself.  I can do my best to deal with the evidence, what I
  cannot deal with is this kind of strong feeling that then is the result of
  this alarmist publicity that people suffer from.
        Chairman:   But you know the problem is not what is right, it is what
  people perceive to be right.
                                Mr Hood
        265.     I can understand your concerns about the tabloid presses but
  it is the anxiety that I experience, and we experience, and I am sure you
  experience, in our surgeries when we have some of the veterans come to us
  asking questions and asking for help.  I have to say, Secretary of State, just
  saying "scientific research says you have not got a case, it is nothing to do
  with the fact you were injected with some stuff that you were not told too
  much about, it is just a coincidence that you are now ill" just does not wash.
        (Mr Hoon)   We do not actually say that to them, of course.
        266.     Of course you do not, but that is their experience.
        (Mr Hoon)   It is not their experience.  As I say, I extend to you an
  invitation to go to the medical facility at St Thomas' Hospital and ask those
  kinds of questions.  Indeed, I have had constituents, and I assume that you
  have, I have sent to St Thomas' because it seems to me that is the best way
  of resolving their doubts and concerns.  Let me be clear, when I went there
  I was told that there are treatments that they can use particularly because
  one of the problems that many in the Gulf faced was the fact that they failed
  to diagnose the kind of shock that people can suffer from in that kind of high
  intensity warfare and the longer that goes untreated the more difficult it is
  to resolve.  You have pressed me about DU, you have pressed me about the
  scientific evidence and, I repeat, in the absence of any specific evidence I
  am confident that we are dealing with these problems as best we can.  We will
  continue, and John Spellar's statement made this clear, to work with
  independent scientific evidence to develop the most reassuring processes that
  we can.  If I have to try and reassure people, the only way I can do it is on
  the basis of the best scientific and medical evidence available.  I cannot
  substitute hysterical fears for that scientific and medical evidence.  If you
  can suggest where else I should go other than, say, the Royal Society or other
  independent organisations for the best scientific evidence, I would be
  delighted to hear where I should go.  I cannot do any better than rely on the
  best evidence that is available to us.
        267.     What advice have you issued to people who feel that they may
  have come into contact with depleted uranium as to how they can get tested?
        (Mr Hoon)   If we can distinguish, first of all, between the proposals we
  are developing for the Balkans, which we will extend to any Gulf War veteran
  who still believes that his illness arises from service in the Gulf, what we
  are seeking to do is to find appropriate screening mechanisms that will allow
  those who have continuing doubts to receive appropriate medical advice. 
  Trying to reassure people is the central purpose of what we are developing. 
  At the same time, if someone, before that is in place, believes that their
  illness is attributable to their service they can be seen straight away and
  they can be treated straight away.  If someone presents either to an Army
  doctor or, indeed, to their own general practitioner and says, for example,
  "I served in the Gulf and I have got an illness that I believe is associated
  with that", they can be referred immediately to St Thomas' and they will
  receive appropriate help and advice.  As I say, there have been occasions on
  which, particularly as a result of psychological conditions, appropriate
  treatment has been given at St Thomas'.  I repeat, and the doctors and nurses
  there have seen now a very considerable number of people, none of the people
  they have seen has been able to demonstrate that the conditions that they
  believe they are suffering from are in any way attributable to their service
  other than, in the main, in relation to these psychological consequences.
        268.     If somebody lives in Inverness do they have to come down to
  St Thomas' or do you have some regional structure?
        (Mr Hoon)   If someone in Inverness has an illness they will be treated
  either, if they are still in service, through the normal processes of the
  military medical service or, if they are no longer in service, by going to
  their general practitioner.  In a sense it is the residual category, the
  people who remain anxious having, in a sense, been reassured that they do not
  have any symptoms attributable to their service.  As far as they are
  concerned, we will pay, for example, their costs of travel down to London and
  their expenses involved in visiting St Thomas', that is part of the service
  that is available to them.  I do not see any gap in the process as far as they
  are concerned.  It is much more sensible for them to be seen by experts,
  people who are used to dealing with the kinds of problems people may have,
  than it is necessarily to try to set up a parallel structure in every part of
  the country.
        269.     This links in with the next question, that of compensation
  arrangements.  The MoD historically has been pretty parsimonious in
  compensating, and that is putting it at its politest.  In the SDR the
  Government announced there would be an inquiry into compensation arrangements. 
  We were hoping that document would be published some time ago.  Can you give
  us any indication as to the progress of this research into new approaches to
  compensating our military personnel who have been disabled as a result of
  service on behalf of the Crown because the record, as I say, has not been a
  particularly good one over the years in my view?
        (Mr Hoon)   The work has certainly taken longer than was anticipated, not
  least because of the complexities of dealing with modernising pension and
  compensation arrangements.  A great deal of progress has been made and I hope
  that we will be able to publish a consultation document in due course.
        270.     In due course.  Can you be a little more specific than that? 
  That could be six weeks, six months, six years.
        (Mr Hoon)   Soon.
        271.     Is that the best we are going to get?  Mr Tebbit, give us
  some relief.  The Secretary of State is being rather imprecise.
        (Mr Tebbit) It does sound incredible but when we got into this we
  found that it was much more complicated and the legislation that was linked
  to all this stuff was much more difficult than we expected, and when you get
  employers, and it is Victorian legislation, it tends to take a long time. 
  "Soon", I think, was an indication that we are not dragging our heels on all
  of this but, on the other hand, we are not in a position to do it in the next
  few weeks.  I would be very surprised if we sat here next year and felt
        272.     I would be extremely surprised and exceedingly angry if it
  takes that long, it has been over three years now.  It must be immensely
  complicated if something takes three years to do.  I think we are getting a
  bit irritated because this Committee threatened to do an inquiry into
  compensation at the beginning of this Parliament and we were bought off by the
  promise that the MoD would do it, and now we are coming to the end of this
  Parliament and still we hear "soon, maybe".
        (Mr Hoon)   I have never said "maybe".  I said "in due course" and I said
  "soon", but I am not going to give you a precise date today because the work
  is not quite finished and it would be wrong for me to do that.  If you want
  to press me as to a precise date, I will give you a precise date.
        273.     I hope that it is in the next two or three months or even
  earlier.  I hope you can use your considerable influence, Secretary of State,
  to kick a few posteriors.  Another thing that has been waiting for some time
  is the pensions review.  Can you tell us if the same criteria apply, same
  flexible timescale apply, to the Armed Forces' Pension Schemes that are again
  causing a lot of disquiet?
        (Mr Hoon)   Because of the obvious overlap between compensation and
  pensions we are dealing with them together and I anticipate that the
  publication of them will be simultaneous.
                              Mr Brazier
        274.     Is there any chance of allowing the different services to
  develop different policies?  It is no secret that the Air Force would have
  liked to have seen the approach outlined in the Bett Report which would have
  effectively ended early pensions for regular officers leaving early.  The
  other two services would see that as very damaging.  Are you looking at the
  wider issue of allowing services to develop ---   You mentioned specific
  problems in particular areas not to be confused with the whole and so on.
        (Mr Hoon)   I do not think it is particularly helpful in the modern world
  to talk about differences between different services.  Certainly what we need
  to try and design are compensation and pension arrangements that are
  appropriate for particular people within the services.  It may well be that
  there is significant overlap and common ground between the different services
  rather than saying all RAF pensions will be on this basis and all Royal Navy
  pensions will be on a different basis.  The reality is that we have got to
  devise arrangements that are sensible for some people who may well leave the
  Army routinely at around the age of 40 as against those who might well stay
  in the Royal Navy until they are 50 and there will be very different
  arrangements accordingly.  There may well also be a need to look at
  arrangements for those who, say, stay in the services for ten years, whichever
  branch of the services they are in.  What we are trying to develop are
  arrangements that reflect the modern world and reflect the fact that some
  people will stay in for 22 years and earn a pension at the end of that 22
  years, whilst others may choose to leave after, say, ten and want to be able
  to use the pension entitlement that they have built up in that period to
  sustain them later on in their different careers.
        275.     One final point.  There is though surely a considerable
  difference in principle between apparently identical arrangements for two
  people leaving the service, say as officers aged 40, between someone on the
  one hand for whom the existing arrangement, the early pension, provides job
  security and, on the other hand, further subsidising someone who is going out
  with an extremely valuable and expensive skill?  That is the difference
  between most of the Royal Air Force and one or two small elements of the other
  two services and the rest of the Armed Forces.
        (Mr Hoon)   I think that is right.  I do not think you should see the
  Royal Air Force as only consisting of pilots.
        276.     Minister, it applies to all air crew, nearly all Air Force
  officer groups in fact.
        (Mr Hoon)   I accept that there could be a difference in that sense but
  then there is a degree of fairness that we have to extend to the individuals
  concerned and if you have trained in a particular area I cannot honestly see
  any particular reason why you should be disadvantaged at the end of your 22
  years' service simply because you have chosen to train in an area of
  specialisation that then is marketable thereafter.  What we have to ensure is
  fairness both for individuals but reflecting, and I think this is the key
  point, both the particular conditions of service life, where we are not
  necessarily expecting people to spend their entire working lives in the
  services, at the same time as making those arrangements as flexible as
  possible to give people the opportunity of either taking their pension with
  them or establishing a sufficient pension that then allows them to do
  something else perhaps.
        277.     So what about those people who, in the 1970s, were caught in
  the trough?  Does that mean there will be some consideration given - you have
  spoken of fairness - to maybe compensating in some way those who, through no
  fault of their own, were caught in that appalling trough and lost large sums
  of money as a result of being caught?
        (Mr Hoon)   I have had a number of letters from colleagues about
  particular cases that have been highlighted in their constituencies as far as
  the Armed Forces are concerned.  I have to say to the Committee that this is
  not a specific problem to Armed Forces' ensions.  It may have been highlighted
  by particular groups, who have clearly written to a number of colleagues as
  a result, but this is a consistent problem of all public sector schemes that
  were subject to pay restraint in the 1970s.  The trough that has been
  identified and colleagues have written about in relation to Armed Forces'
  pensions, the same trough exists for public sector pension schemes during the
  period.  It has always been a basic principle of all public sector schemes
  that the enhancements and changes are not retrospective.
                              Mr Hancock
        278.     Most of those schemes have been amended to take care of that.
        (Mr Hoon)   They have been amended prospectively, I am not aware that
  they have been amended retrospectively, which is the question the Chairman
  asked me.
        279.     I hope that is going to be at least considered in the
  document that you produce.  When we were in Bosnia three years ago we had a
  lot of complaints from servicemen who felt that they had been disenfranchised
  prior to the 1997 election because of their lack of ability to obtain postal
  votes.  As a result of our report, the MoD promised to examine the issue
  jointly with the Home Office.  I would not expect you to be able to answer the
  question now, Secretary of State, but would you consider the question I have
  asked, look at what was promised, and perhaps you can come back to us and tell
  is if there are going to be any changes to ensure that when the election
  eventually does come, and the certainty of that appears greater than the
  certainty of your timescale for announcing the pension scheme, that people are
  not going to be disadvantaged?
        (Mr Hoon)   I will write to you about that.
        Chairman:   The last few questions are on the Type-45.
                              Mr Hancock
        280.     If I could, Secretary of State, draw you to the critical
  question as far as my constituents and many others in South Hampshire are
  concerned about and that is the future build of the Type-45.  You will
  recollect that you gave a commitment here that you wanted to see those ships
  built by at least two companies and it would be spread around the country, and
  you repeated that twice in the House of Commons in debate.  Is it still your
  intention to divide the construction of the first three Type-45s between the
  two contractors in order to keep alive real competition for the construction
  of the rest of the vessels?
        (Mr Hoon)   Yes.
        281.     And how do you intend to do that?
        (Mr Hoon)   By continuing with the process of ensuring a fair
  distribution of work between the private contractor and Vosper Thornycroft.
        282.     Once you have let the contract to the prime contractor, what
  influence can you bring to bear to ensure that the prime contractor conveys
  into reality your sentiments?
        (Mr Hoon)   Because we are working with the prime contractor, who in turn
  is working with Vosper Thornycroft, to develop a design that is sufficiently
  robust then to allow for sensible pricing arrangements to be agreed on the
  remainder of the Type-45s.
        283.     Is it not somewhat bizarre that the prime contractor then
  submits a bid over and above, knowing of your intention to split this work,
  to build all 12 ships himself?
        (Mr Hoon)   We are looking carefully at the unsolicited bid that we
  received from BAE Systems Marine.  It is being evaluated.  Obviously with any
  proposal that offers value for money to the taxpayer we have to consider it
  carefully.  It has not in any way changed our central strategy, which is to
  ensure that there is competition and that competition must mean that we have
  more than one company able to build Type-45s. Nothing has changed in our
        284.     Have you met with BAE Systems to convey to them your strongly
  held view that they should still be looking to share that work since that
  prime contract has been let?
        (Mr Hoon)   I have certainly had conversations with leading members of
  BAE Systems where that view has been very firmly emphasised to them.
        285.     Could Vosper Thornycroft put in an unsolicited bid to build
  all 12?
        (Mr Hoon)   They could and we would obviously look at that carefully as
  well.  One of the things that appears to have been overlooked in some of the
  comments I have seen is that Vosper Thornycroft are very heavily engaged with
  BAE Systems in the design stage.  A joint team is working to develop a design
  that then will form the basis for the construction of the Type-45s.
        Chairman:   So if I was living in the Portsmouth area ----
                              Mr Hancock
        286.     That is a rather strange comment bearing in mind that they
  were not, in fact, consulted about the unsolicited bid to build all 12 ships.
        (Mr Hoon)   It is not for me to comment on an offer by a private sector
  company.  We will evaluate that offer.  All I am saying to you as a matter of
  fact is there are employees of Vosper Thornycroft working on the design of the
        287.     If I was living in the Portsmouth area then I should not be
  too exercised by the adverse publicity that somehow all is going to be pinched
  away from Vosper Thornycroft?
        (Mr Hoon)   There is no change in Government policy.
        Chairman:   Thank you all very much for coming along, it has been a very
  interesting session.  We will, of course, be seeing you shortly when Dr Lewis
  will not be doing a runner, when you come and talk about European Security,
  I am sure he will be fixed rigidly to his seat.  Thank you.