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Mr. Ingram: We are comfortable with our solution, but it is the Opposition's job to try to knock us down. I do not need a lot of allies behind me, although I welcome every contribution that will be made.
Smart acquisition is not just about buying new equipment; it is also about how we manage the equipment we own to maximise the capability available to front-line forces in a cost-effective manner. That means looking not only at how we acquire the equipment in the first place, but at how we support equipment through its in-service life and how we undertake its disposal.
Being smarter in how we support equipment falls to the Defence Logistics Organisation, which as part of its drive to reduce costs and improve effectiveness is reviewing stock holdings and using innovative techniques to identify further reductions.
Mr. Hancock: I congratulate the Minister on the robust way in which he has defended his position and thank him for his generosity in taking interventions. I sense that the Minister is easing to a conclusion, but before he does can he tell the House whether he is satisfied that the procurement that will be required under the new chapter can be achieved within the new money that has been allocated to the Ministry, or will some of the existing procurement schemesthose in the planning or development stagebe cut?
Mr. Ingram: I am grateful to the hon. Gentleman for his intervention, but he must not have heard my earlier remarks. I said that a White Paper will be published tomorrow and the Secretary of State will then elaborate on its contents. I have pointed out the £1 billion of new capital investment and the £500 million of other money, but I suggest that the hon. Gentleman seek to explore his specific questions after the White Paper is published.
The Defence Logistic Organisation's non-project procurement office was set up on 1 April 2000 to manage general stores and has already generated significant savings. In its first year of operations, it rationalised the supplier base, making savings of some £40 million on new contracts valued at £350 million. Other partnering agreements with industry are helping the Department to manage its stocks more effectively, transferring stock-holding activities and risks to contractors. [Interruption.] I have a couple more points to make. We have had a good debate so far, and I look forward to further contributions.
Another important plank of our overall smart acquisition programme has been the drive to extend its benefitspreviously confined mainly to the equipment programmemore vigorously into the acquisition of services, especially through private finance and new commercial partnering arrangements. Our public-private partnership and private finance initiative programmes continue to have an important role to play in making best use of defence resources and delivering improved services. We have the richest, most diverse and one of the most successful PFI programmes in Whitehall. PFI has enabled us to obtain new aircrew training simulators and other equipment-based services, but such schemes could go much further and that is the approach that we are taking.
The last issue that I wish to address is industrial policy and I see that my hon. Friend the Member for North Durham (Mr. Jones) who intervened earlier on that point is still in his place. I am happy to exchange views with him if he has any further thoughts on the issue. All of the
Competition remains the bedrock of our acquisition policywhen sensibly applied it consistently gives the taxpayer value for money. Competition works to encourage innovation. As our procurement requirements change, innovation will increasingly be the key to winning many contracts, something that I hope will benefit many of our smaller and medium-sized firms. Competition should be seen not as a threat but as an opportunity.
I would not suggest, however, that there is a single standard approach to that opportunity. We will use alternative procurement routes, such as partnering, where industry and Government can benefit from stable long-term relationships. Suggestions from some parts of industry that we should look only to privileged or monopoly suppliers are shortsighted: to do so would stifle innovation and we would end up paying inflated prices for probably inferior equipment.
Let there be no doubt. We want to buy the best. We want to buy British. So we must constantly look for ways to help British industry to be the best, but industry has to play its part. My Department's first responsibility is to spend the defence pound to achieve best value for money. That applies more widely than simply purchasing equipment. It has broadened from equipment acquisition to the purchase of services, and many defence companies now cross national borders. It is where the technology is created that is important and that means looking to see where the skills and the intellectual property reside, where the investment is made, and where the jobs are sustained and created.
We also support the UK defence industry with our efforts to improve access to foreign markets and through our research and technology strategy. Increased access to foreign defence markets will improve technology transfer across national boundaries and increase the opportunities for our companies to compete for export orders. That is important: UK defence companies cannot rely on MOD orders alone to keep them in business. That is not the MOD's job.
Mr. James Arbuthnot (North-East Hampshire): Is the Minister aware that there should be much support for the Government's decision on head-up displays being sold on US aircraft? If we were to withdraw the right for manufactured equipment from this country to be sold abroad by our allies, we would never be able to enter partnership agreements for valuable equipment that will win markets all around the world.
Jim Knight: My right hon. Friend mentioned research and development. Does he agree that having a geographical concentration of expertise, especially in research and development, is a good thing? In my area, we have expertise in sea systems technology, two QinetiQ operations that are based in the area, and many other
Mr. Ingram: The concentration of science and technology cannot be a good thing, because we want to see a spread over the UK. However, industry has to stand by the decisions that it takes. We cannot second-guess companies or force them to do something else. However, we can encourage them and discuss the Government's future relationships with them. I have tried to set out what the Government can do, what we expect of industry and the possibilities for a partnership approach. That does not rest just with the MOD: it applies across Government delivery.
The point made by the hon. Member for South Dorset (Jim Knight) is important, and it has come to light only in the last week. I had a letter from the Under-Secretary of State about the concentration of DSTL employees on three sites. The point made by the hon. Gentleman relates not to company decisions, but to a decision by the Government. I suspect that it is a very good point. Can the Ministeror perhaps the Under-Secretary of State when he winds up the debateexplain the rationale behind that concentration?
Mr. Ingram: As the hon. Gentleman says, the decision rests outside the Department, but my hon. Friend the Under-Secretary of State may explain the rationale later. Let me, however, say something about the near-company status conferred by some of our activities. Trading funds are one example. We must operate on the basis of best principle rather than mere dissemination for the sake of it. Quality decisions must be made to secure the maximum return on investment. We are no different from industry in that respect. As I have said, we expect a great deal from industry. We must deliver a great deal in return, and we must find solutions. Emotive decision-making is not the best way of delivering on any Government policy, but that applies particularly to the Ministry of Defence.