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Mr. Duncan Smith: Perhaps the right hon. Gentleman will answer the question that I asked earlier and more than a year ago. When does the contract cease to be viable? Numbers have fallen to 196. That is only 16 above the line that British Aerospace has set. It claims that anything below that is not viable. Everyone wants the aircraft to be produced, but the Secretary of State should tell us the point at which the contract becomes unviable.

Mr. Hoon: If the hon. Gentleman had studied the details that were set out in Paris more carefully, he would know that there was a fixed price for the aircraft, and that some contractual negotiations have to be resolved with the prime contractor. Clearly, I would not have signed the memorandum of understanding on behalf of the United Kingdom if I was not confident that the project would go ahead. I think that that is a complete answer to the hon. Gentleman's question.

It has never been intended that the A400M would be a short-term solution to our strategic lift needs. That is why, in the meantime, the first C17 strategic transport aircraft for the RAF arrived at Brize Norton last month, just a year and a day after we announced our intention to acquire the aircraft, and ahead of the contracted date. Together with six new roll on/roll off ferries and four logistics ships to support our amphibious and expeditionary capability, C17 and A400M represent significant increases in our strategic lift capability.

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Other major programmes are on the horizon: the future joint combat aircraft, JSF; the future strategic tanker aircraft; and the future offensive air system, in which we are looking years ahead to new technologies and concepts that will significantly enhance the capabilities of our armed forces. Our warship building programme will involve more than 30 ships in the next 15 to 20 years. At the heart of this programme are two new aircraft carriers, to which the Government are fully committed. They will be among the largest warships that the Royal Navy has ever had, and they will be built here in the United Kingdom. With the future joint combat aircraft, they will deliver a formidable force projection capability.

The outline of this new equipment--the envy of most other armed forces anywhere in the world--is not one that we would recognise from recent media coverage or from the efforts of the hon. Member for Chingford and Woodford Green to run down and criticise this programme. There have been inaccurate reports of cuts in Army regiments and cutbacks for the Royal Navy, all of which have been gleefully seized on by the hon. Gentleman, who asked, perhaps rhetorically, why defence had not featured in the general election campaign. I understand that he churned out several press releases every day in a vain effort to interest some of the newspapers in his more extreme claims, but, so far as I could see, they all chose to ignore his ramblings. Perhaps that was because they could not take entirely seriously the claims that he was making.

The reality of what is happening is entirely different. In the past year, the Army has been doing excellent work in Sierra Leone, the Balkans, Northern Ireland and, with the other services, at home in response to flooding and foot and mouth disease. The Royal Navy and Royal Marines have supported 12 short-notice operations, sent amphibious and carrier forces to Sierra Leone, carried out a global deployment, and played a major role in Kosovo and Northern Ireland. The Royal Air Force has continued to fly operational missions over the no-fly zones in Iraq and in the Balkans, provided air defence and air support in the Falklands, deployed to Sierra Leone, and kept up a permanent search and rescue service in the United Kingdom. These do not look like forces that are suffering from a series of cuts.

Mr. Quentin Davies: Will the right hon. Gentleman give way?

Mr. Hoon: Before I give way, I want to deal with the point made by the right hon. and learned Member for North-East Fife (Mr. Campbell), who mentioned Iraqi claims of casualties as a result of patrols in the no-fly zones. He should recall that the Iraqi regime has routinely claimed casualties on days when allied planes have not even been in the sky. However, I am aware that, on a particular occasion recently, allied aircraft came under attack from Iraqi missiles. Fortunately, none of those missiles hit their intended targets, but one missile was seen to return to the ground, exploding in what was clearly a populated area. Once again, it appears that the people of Iraq have suffered at the hands of Saddam Hussein's regime.

Mr. Davies: We, of course, strongly support the Government on Iraq, and I am sorry that the Liberal Democrats have become soft on that issue--perhaps

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characteristically so. The Secretary of State has set out a number of operations in which our armed forces are doing magnificently, but they are doing magnificently on the basis of numbers that are too low, of being overstretched and of equipment often not coming through. Does the Secretary of State deny the point that I made earlier, which was that the Royal Navy and the RAF are short of 125 combat pilots, that the situation is--on the Government's own projections--getting worse, and that they are going to be short of 132 pilots next year and more than that thereafter? Does the right hon. Gentleman deny that? If he does not deny it, what is he doing about it?

Mr. Hoon: I am sorry that the hon. Gentleman gets so excited about these issues. He will recall that I set out clearly and calmly the precise problem that we face as far as pilots in the RAF are concerned. It is a problem being faced by air forces all round the world. There is an airline company at the moment offering £50,000 to recruit new pilots, and it has proved very difficult for military air forces to compete with that kind of inducement.

Nevertheless, as I set out to the House in a detailed statement about that problem, we are addressing it by providing retention bonuses and other financial incentives, which are beginning to have some effect. That takes time, and I have to tell the hon. Gentleman that, having set the matter out shortly before the general election campaign, we have not achieved immediate progress, which perhaps explains his hysterical response. However, we are addressing the issue, as are other air forces around the world.

The point that the hon. Gentleman needs to consider carefully before making such criticisms is, were they accurate, whether the armed forces would be able to conduct operations of such range and quality as those that they carried out last year. I am confident that the armed forces will continue to produce that magnificent effort with the support that they have received from the Government.

Indeed, as the hon. Member for Chingford and Woodford Green mentioned it, I remind the House that, thanks to the prudence and the efforts of the Chancellor, the Government have provided the first sustained real-terms increase in the defence budget in years--£1.25 billion of new money over and above inflation. [Interruption.] I hear sedentary comments from Conservative Members such as, "Tiny in real terms." They supported a Government who slashed the defence budget by more than 20 per cent. over and over again. How they can sit there and complain about a real-terms increase over and above inflation beggars belief.

Mr. Duncan Smith: I have a simple question. In 1997, did the Secretary of State's Government take over a budget that sat at 2.7 per cent. of gross domestic product? Is not it now nearly 2.4 per cent. of GDP?

Mr. Hoon: The hon. Gentleman knows full well that, since 1997, there has been a significant improvement in the overall budget available to the Government, because of our extremely good economic record. Therefore, he

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must concentrate on the real-terms increase and the amount spent on defence--not just in one year, but in three. If he had the slightest decency and the slightest interest in considering the matter positively, he would agree with and approve of it, instead of sitting there criticising the increase despite having supported a Government who cut defence.

I emphasise that the strategic defence review was based, above all else, on the quality of the people in the armed forces. Reducing the operational commitment faced by our armed forces was one of my first personal priorities when I became Secretary of State and, this year, there has been a continued recovery from the exceptionally high operational tempo of 1999. Average intervals between operational tours for units in the infantry, artillery and armoured corps have all showed significant improvements, and that has been helped by improvements in retention. Outflow from the regular forces decreased by 6.3 per cent. in 2000-01 compared with the previous year.

I shall ensure that the hon. Member for Newark is kept up to date with all the latest statistics, because I am sure that he will play a regular part in Defence questions. I welcome his contribution.

Mr. Paul Keetch (Hereford): Will the Secretary of State revisit the carriers, because there has been enormous press speculation in the past few days? If he cannot say anything more concrete than what he announced today, can he tell the House by which month this year, or by which year, he will be able to place firm orders for the two carriers?

Mr. Hoon: We are in the middle of a development programme for two sophisticated carriers. To answer one of the points put to me earlier, the money is in the budget. That programme will continue. It is a carefully staged process to ensure that we have the right equipment for those sophisticated vessels. Nothing has changed, so, notwithstanding press speculation, which, originally, was in the negative, I am able to say that there has been no change in the Government's position.

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