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Fire Dispute: Performance of Armed Forces

Lord Peston asked Her Majesty's Government:

The Minister of State, Office of the Deputy Prime Minister (Lord Rooker): My right honourable friend the Deputy Prime Minister has today placed copies of a report produced by the COBR=Joint Assessment Cell, entitled Industrial Action by the Fire Brigades Union. Contingency arrangements during the 8-day strike, 22-30 November 2002, in the Printed Paper Office and the Libraries of the House.

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Lord Kirkhill asked Her Majesty's Government:

    What progress has been made on the sale of QinetiQ plc. [HL465]

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): On 1 July 2001 the Defence Evaluation and Research Agency was successfully divided into QinetiQ plc, a wholly government-owned company, and the Defence Science and Technology Laboratory, which remains part of the Ministry of Defence.

On 6 March 2002 (Official Report, col. 313–14W) we informed the House in another place that we had decided to sell a substantial stake in QinetiQ to a strategic partner who would help to develop the company in preparation for a future flotation on the stock market. Our decision followed a detailed analysis of market conditions which led us to conclude that this approach offered best value for the taxpayer and would meet our objectives for a successful public private partnership.

Following the announcement in early September that the Carlyle Group had been chosen as preferred bidder in MoD's selection of a strategic partner, the MoD has now signed a deal with Carlyle. The transaction values QinetiQ at around £500 million. Following adjustments to reflect current assets and liabilities, MoD will receive between £140 million and £150 million from the transaction (the final amount will depend on the company's exact financial position at completion). This will be in addition to £50 million already received from QinetiQ as part of the purchase price for its assets.

The Carlyle Group will acquire a 33.8 per cent economic interest in QinetiQ, with a further 3.7 per cent of the shares to be available for employees of QinetiQ. Management control and responsibility for setting future commercial strategy will now lie with QinetiQ and Carlyle, allowing them the freedom to make appropriate decisions to grow the business. MoD will retain those rights that are conventional for a major shareholder. QinetiQ's board of directors will be augmented by the appointment of two Carlyle nominees. MoD will also have the right to appoint two non-executive directors. QinetiQ employees will have the opportunity to invest in the future of the business through a staff equity scheme and will each receive a small free allocation of share options.

This is a good deal for the taxpayer, for QinetiQ and for the company's employees. At completion, the taxpayer will have received a total so far of around £200 million from the PPP, and MoD's retention of a significant stake in the business will ensure that the taxpayer shares in the anticipated future growth in the

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value of the company. The company will benefit from the injection of new private sector capital, together with the Carlyle Group's track record in assisting companies to grow and develop. As previously announced, our intention remains to sell our entire stake in QinetiQ within three to five years, probably through a flotation on the stock market.

QinetiQ will remain a British company based in the UK. MoD will retain a special share in the company to ensure that the nation's defence and security interests continue to be protected. There will also be robust safeguards to prevent conflicts of interest and to ensure that the integrity of the Government's procurement process is not compromised.

Subject to the satisfactory fulfilment of a number of final conditions, we expect to achieve the formal completion of the sale process early in the new year.


Lord Kirkhill asked Her Majesty's Government:

    What date Eurofighter Typhoon is expected to enter service with the Royal Air Force. [HL466]

Lord Bach: Progress towards the entry to service of Typhoon has been reviewed closely since the start, in April 2002, of test flying with the instrumented production aircraft. The process of gathering flight safety and performance data, which is necessary to accept aircraft into service, is taking industry longer than the agreed schedule. The large volume of work to resolve outstanding and arising design issues, although individually minor, has also progressed more slowly than expected. As a result, we have concluded with our international partners and with industry that the evidence required to permit contractual acceptance of the aircraft by the four partner nations will not be complete before the end of March 2003. Allowing for the joint, four-nation acceptance process, aircraft should then be ready for hand-over to the Royal Air Force by the end of June 2003.

In any event following the loss of a development aircraft in Spain on 21 November, it is essential that there is a time allowance for the realignment of test flying tasks. Further delay cannot be ruled out until the causes and implications of the crash are fully understood. This second delay, since the contract was placed with industry, to Typhoon's entry to service is extremely disappointing, but safety remains paramount, and we will only accept aircraft that meet the agreed specification. Every effort will be made to accelerate the entry to service and work-up process to prevent or minimise any delay to the operational employment of Typhoon, scheduled for the second half of the decade. It is this latter date, of course, when the RAF is able to use the aircraft on operations, that is so critical.

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