Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)



  20. If you go it alone and stand alone—
  (Mr Tebbit) But we do not.

  21. If you did you would know where you stood, would you not? You would know what the cost was going to be, you would know what the delivery date was going to be, you would know what the capability was going to be and you would not be dependent upon another country.
  (Mr Tebbit) There is a narrow answer and a broad answer. The narrow answer is, as you see, the cost of research and development for modern defence projects is usually so great that it is very difficult for any one nation to fund it entirely by itself without collaborative partners. Even the United States looks for collaborative partners when it is developing a modern, major equipment system. There is a straight cost argument right at the beginning. The general argument is in many ways much more significant. We do not envisage in the future many activities that we will be doing by ourselves, we expect to operate in coalition with partners when we are doing defence activity. Gone are the days when we would stand alone, as it were, and face a threat separately. We are a member of an Alliance and we operate, as I say, within that Alliance. We are in the Balkans as part of KFOR, not as the UK standing alone. Sierra Leone is a bit of an exception, I agree to grant you that, but even there we are building an international group around us to do training. So since we operate together, and expect to operate together with partners in the future in almost every scenario we can think of, it is not unreasonable, in fact it is very sensible, to say that we should also try to harmonise on our equipment requirements so that we are inter-operable, that we can fight with each other, that we have common systems that can communicate with each other and so on. The idea of Britain standing alone with its own, as it were, insulated defence is, if I may say so, a mistaken concept.

  22. That is fair enough, I do not take what you say lightly. If this meeting had been taking place in, say, the 1970s, or even the 1980s for that matter, you would have possibly never envisaged the Cold War not taking place, would you?
  (Mr Tebbit) No, we were still at the height of it then.

  23. Exactly. You have just said to me that there is no way that you could envisage that we would not be in partnership at the present time with the people we are involved with at the moment.
  (Mr Tebbit) On major defence activity, yes.

  24. If you look at the scenario of, say, the 1980s and the Cold War, you did not envisage that, so what is to say that you are not wrong now?
  (Mr Tebbit) Even during the Cold War the last major aircraft project that we tried to do entirely by ourselves was the TSR2, that was back in the 1960s when we had to scrap that. We have been co-operating on aircraft because of the cost for a very long time now.

  25. Okay. Let us move on. Figure 14, "Factors causing delays on co-operative acquisition programmes", clearly shows that partnerships do actually delay projects, does it not? Very much so.
  (Sir Robert Walmsley) I did not catch the point.

  26. This particular figure shows that by going into partnerships it actually does clearly hold up projects, projects take a lot longer.
  (Sir Robert Walmsley) The report, if I may, makes it absolutely clear, and you were right in your opening remarks, that defence procurement is a complex and perhaps costly business.

  27. I do not doubt that.
  (Sir Robert Walmsley) And international co-operation adds a layer of complexity to that. Of course, international programmes are not immune to all the difficulties that national programmes suffer. What I would just reinforce is what Kevin Tebbit said, that if you cannot afford the project on your own you have to find a partner. Part of the skill in assembling these international programmes is to find a partner who has got essentially the same capability need in the same timetable with a real budget, not just somebody who wants to talk about it and suck you in, and then get together and produce some industrial arrangements across the countries that will produce benefit to both countries, otherwise we would not have the equipment at all.

  28. I am being a little bit of a devil's advocate here because I agree with what you are saying basically. I was just interested to hear your views on the disadvantages. If you turn to paragraphs 2.14 to 2.16, when I read this I got a mixed perception of what was actually happening. On the one hand there appear to be great advantages to co-operation after a scheme has been produced nationally, and if you look at 2.15 and read the paragraph it says that there were savings of 30 per cent in the costs and 20 per cent through the pooling of spares, so there were great savings there. On a programme that has been produced nationally the economic benefits are quite considerable and yet if you read 2.16 we are told that on joint programmes, such as the Tornado and helicopters, the Puma, Lynx and Gazelle, there seems to be little co-operation on support requirements at a later date on joint projects. Is that not again starting to prove my point that it is best to go alone?
  (Mr Tebbit) It does not prove the point that it is best to go alone, it proves that we got that wrong. We did not do enough work to sort out the collaborative support arrangements in the early phases of the Tornado project and we have suffered as a result and have lacked commonality of aircraft types across the countries which were originally in the collaborative programme. That is a mistake we are not going to make on Eurofighter and we are even less likely to make it on—

  29. I was going to come on to that.
  (Mr Tebbit) Since you are being so kind as to try to think through the various pros and cons and the factors involved in national or international co-operation, the other factor is the way industry has changed over the years.

  30. I was coming to that.
  (Mr Tebbit) Please, do not let me pre-empt your question.

  31. I can remember in a previous PAC meeting that we had when I first came on here we discussed the Tornado and there was a fault on the Tornado, if I remember rightly. Had the Italians not fixed that fault and not told us, or they told us and we had done nothing about it? I can remember that there was a lack of co-operation. Can you remember?
  (Sir Robert Walmsley) I certainly remember the problem, which I think was fires associated with a clutch in the rear fuselage of the Tornado aircraft. You have identified quite correctly that we had not communicated enough between the nations on this problem, that was absolutely true. Eurofighter is not like that, I have to make that quite clear. On Eurofighter we are buying simulators together, we have now agreed a common support philosophy, we have got a tranched support contract. As the report says, it is not finished because we have a number of tranches to let. We have placed the first four or five tranches of the support contract, we are working together. It is back to the point I made to the Chairman about exercising an iron grip on a common configuration of the aircraft and we did not do that with Tornado.

  32. I will not go on to talk about Eurofighter now because you have covered that. Do you make sure that there is total co-operation where a programme has been produced nationally and there is total co-operation with the partners there so that when you produce something nationally there is co-operation at a later stage?
  (Mr Tebbit) On in-service support?

  33. Yes.
  (Mr Tebbit) Yes, we do. Increasingly one does try to do that and there are various initiatives in train, for example, to make sure that ordnance, the stuff that is fired out of them, is common. Also there are other things like, for example, helicopters where the Italians produced half of the Merlin helicopter and we produced the other half. We still try to ensure that there is commonality as far as possible. Just because you do a national project does not mean to say that you do not try to do inter-operability and common support arrangements. Indeed, in NATO at the Conference of National Armaments Directors—CNAD—one of the successes of this otherwise non-August body over the last 20 years frankly has been to standardise and promote commonality so that different weapon systems can still fire the same sort of round.

  Mr Steinberg: I have a number of questions I was going to ask but I will miss them out because I only have two minutes.

  Chairman: You are on to your last ten seconds.

  Mr Steinberg: The answers were very long.

  Chairman: I will make that decision. Last question, please.

  Mr Steinberg: How level is the playing field when prospective partners make their decisions on whether to proceed with a project or not? In paragraph 4.8, if I can find it—

  Chairman: Page 41.

Mr Steinberg

  34. In paragraph 4.8 it tells us that in "17 recent major procurement decisions involving a co-operative option .... some consideration of industrial and wider factors were included but only seven cases were supported by quantified analysis." Yet in paragraph 4.10 we are told that our major European partners tend to place a much greater emphasis on the importance of protecting national industrial interests, for example the Germans and the Italians on the Tornado and the French on the Franco-German helicopter. How can we actually be sure that the British taxpayer, and when I say the British taxpayer I mean in terms of jobs and everything that comes from that, are being protected as well as our European partners are being protected by their host nations, if you like? Are we much more committed to it than they are in terms of the national good? Do they consider their national issues more than we do in terms of jobs and everything else?
  (Mr Tebbit) I think it is fair to say that France, Germany and Italy have tended to put a weight on the industrial participation which has been so heavy that it has tended to erode the economic advantages of co-operation. It depends where you start this from. If you start it from the importance of getting defence equipment, value for money, cost effectiveness, you tend to want to promote competition and be prepared to see the best results through that process. In the long run that is the way you get the best equipment and the most healthy defence industry. British defence industry has done so well because it has been much more focused on competition and winning contracts through its performance than on being allocated work shares in a rather traditional manner. The reason, for example, British industry has had such a huge export market is not because they produce things solely for export but because they have been competitive and have won in terms of price and quality overseas. So in the long run it does not help simply to protect industries by giving undue weight to industrial factors. It does not mean to say they are not relevant, it does not mean to say we do not take them into account, we do, but we do not drive the project from that angle as much as perhaps some of our partners have done in the past. I happen to believe they are doing that much less so now and are more or less coming around to our own Smart Acquisition approach.

  Chairman: Can I ask the witnesses to be a little briefer in their answers, I had to give Mr Steinberg four minutes extra. David Rendel.

  Mr Rendel: I hope I will get the same, Chairman.

  Chairman: No, you will not.

Mr Rendel

  35. In answer to the first question from the Chairman, which was a two part question, I am not quite sure that you answered the second part, if I may say so. You were being asked about the Letter of Intent and the Declaration of Principles and I am not clear in my own mind that you really answered the question how you measure the success of those two.
  (Mr Tebbit) You are absolutely right, I did not answer that, and I hoped you would not have remembered. Measuring the success of something which is not yet fully in place is obviously quite tricky. Measuring something which is dependent on facilitating industrial participation, co-operation, security of supply, is rather harder than something which is purely controlled by Government. If I may, I am going to do my usual thing and ask Sir Robert Walmsley, who was responsible for trying to put these in place, to give you a better answer on that.
  (Sir Robert Walmsley) I will do my best. The background is following the Prime Ministerial statement with the Chancellor of Germany and the President of France in December 1997 that Europe needed to form transnational industries, the Ministry of Defence set out to see how it could best support the efficient functioning of such transnational industries and that is what the LOI is about. Since December 1997 I think we have seen an unprecedented degree of transnational defence industrial consolidation in Europe. That, to me, is a measure of the confidence industry has that it can supply across its borders. That is what we have to do otherwise we end up with all these separate defence industries in Europe replicating each other's capabilities. The LOI is what allows the United Kingdom to reach across the North Sea into Germany and obtain equipment from there and vice versa with confidence that security of supply will be there. If there was not an LOI I would suggest that the degree of industrial rationalisation would be much less. That is the first success. The second point—

  36. Can I stop you there. You seem to be saying what you think the successes are going to be but not how you are going to measure them.
  (Sir Robert Walmsley) I would measure it by observing the number of international joint ventures that have been set up since December 1997. That is what I was trying to say. That was the aim, we wanted industrial consolidation and this was how we could help. We have set it in place and industrial consolidation has happened way beyond what I think most people believed was possible, international confidence. At the lower level I am looking to see by how many weeks we can reduce the clearance time to obtain a visit by a foreign national to a UK company and vice versa. This is the oil in the gearbox of international collaboration and the LOI is designed to facilitate just that. When this framework document is ratified, instead of waiting four or five weeks to get a security clearance so an expert can come and look at something, we should be able to get them in and out very much more quickly. This is the hidden sand in the gearbox of international co-operation and it will help with that. We will measure that.

  37. Good. The second question is on figure ten which is on page 15 of the report where it shows four different types of international co-operation offering different benefits and drawbacks. What it does not mention there is any form of equipment sharing. It mentions shared facilities but not actual armaments or equipment sharing. Is there any scope for that sort of co-operation which could lead to cost saving?
  (Mr Tebbit) That is a very interesting proposition. It is something that in the UK we have tended to think about less, I suspect, than some smaller countries who have got more of an impetus towards that. There is a proposal to do more pooling, for example, in air transport. We have not actually gone as far as saying our aircraft could be shared but we are thinking of ways where, as it were, one could almost have credits in relation to each other where we might do something for somebody else and then they would have an obligation to reciprocate. There is that sort of thing. I suspect the AWACS force is probably the strongest example of a multinational force that was created sharing, as it were, the air frames through NATO. That probably is the most significant thing. We are going into joint force activity, for example, in amphibious forces where we already have agreements with the Netherlands and are looking to extend that more widely through the European littoral. It is a very interesting area and one which I know Geoff Hoon is very keen to promote in terms of the efficient use of assets. One does want to make sure that if we offer to share that that will be reciprocated in full by the partner and that has been something of a problem.

  38. Presumably with spare parts and so on there must be some scope for that where you do not know how much you will use a particular piece of equipment?
  (Mr Tebbit) Yes. It is hard to share a tank or something. Easiest are the very big things like satellites that are shared to some extent. We have put up collaborative joint satellites which obviously are shared and facilities are shared from those. There have been a series of satellites that have been done in that way, I think.

  39. We are allied with different countries and some of those may be involved in different wars or whatever, some may lose bits of equipment faster than others. Is there scope for having—
  (Mr Tebbit) Mutual support arrangements, yes, indeed. There are agreements for mutual support arrangements of various kinds. We have some with the Americans, for example, where this does indeed happen.

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