Defence Implementation Road Map

Lord Spellar Excerpts

Tuesday 10th November 2015 General Committees

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

What a pleasure, Mr Hanson, to serve under your chairmanship twice in a week. This is becoming a regular occurrence.

It may help the Committee if I explain a little of the background and why the European Scrutiny Committee recommended this Commission report for debate. A precursor July 2013 Commission communication, “Towards a more competitive and efficient defence and security sector”, was part of the preparations for the December 2013 Defence Council, the first for five years on the EU’s Common Security and Defence Policy—CSDP. It was designed for Heads of State and Governments to agree its strategic direction over the next few years and it was one of a trio of scene-setting documents, all of which were debated.

This Commission report set out a high-level roadmap for implementing activities proposed in the earlier communication. The Minister declared himself encouraged by the Commission’s approach as it began the follow-through process, but the previous Scrutiny Committee had concluded that there was still a significant number of areas that could go in the wrong direction notwithstanding the Minister’s best endeavours, so that Committee accordingly formally requested the opinion of the then Select Committee on Defence.

In brief, the Defence Committee shared the Minister’s concerns that any detailed action in respect of an EU-wide security-of-supply regime and the defence procurement directive could lead to unnecessary regulation, encourage European protectionism, constrain the Government’s ability to make their own defence procurement decisions, or risk undermining the UK’s and other European partners’ relations with the United States. It expressed concerns about a proposed green paper on the control of the defence industry’s capability and the value of new legislation in this area. It was also concerned about Commission action in third-country markets and what value would be added by the Commission’s extending its activities in this area.

The Defence Committee agreed with the Minister that export policy should be a matter of national sovereignty and said that any CSDP-related preparatory action on dual-use research should ensure that UK national interests are protected and that intellectual property rights remain with the industry and not the Commission. Notwithstanding the increasing synergies between the defence and civil sectors, it questioned what value the European Commission could add in a number of areas for action outlined in the report. It also stated that research and development in science and technologies applicable to defence, which the Committee called

“the life-blood of the military capabilities of advanced states and alliances”,

must remain free from unnecessary bureaucracy, especially where dual-use technologies were in development. It concluded that it was concerned that initiatives might arise from this roadmap that would lead to unnecessary legislation and duplication of effort with NATO.

In summary, the Defence Committee strongly endorsed the previous Committee’s view that this report should be debated.

[Mr John Spellar (Warley) (Lab)]

Will the hon. Gentleman give way?

[Mr Rees-Mogg]

No, I cannot give way at this point.

--- Later in debate ---

[Mr Brazier]

May I just set my hon. and gallant Friend’s mind at rest? There are a number of risks from the Commission, as I have set out, and we are looking forward to seeing the new document that comes out of the Commission after Christmas, but the EDA is not a threat. It is a low-budget organisation, which, in the words of its last director, is basically a speed-dating agency. It enables European countries that are interested in a particular area to sit together, discuss things and find ways of saving money. I mentioned helicopter training as an example. It is not a threat in the way that he describes. There are some threats potentially coming out of the Commission, although I do not think they are as bad as they were a year or two ago, and I outlined some of them in my speech, but I assure my hon. and gallant Friend that that is not one of them.

[Mr Spellar]

May I take the Minister back to shipbuilding? Will he tell us what naval shipbuilding capacity there still is in France, Germany and Spain, which are all exporting to a number of other countries? I am not sure about Italy. Germany and Italy also have major civilian capacity in building cruise ships. What are the Government doing, apart from buying ships from South Korea, to help that position?

[Mr Brazier]

What we are doing about it is that we have the largest set of naval shipbuilding orders placed of any European country. Each of the major European countries chooses, as we do, to place all its warship orders with its domestic market. Merchant shipbuilding capacity in this country and all its major features had disappeared long before the coalition Government took office—little of it was left in 2010, let alone 2015—but the reality is that we are placing a whole series of very large orders for naval shipbuilding.

[Mr Spellar]

Was it not the case that with the vessels referred to on the civil side an offer was in fact made by an Italian company to undertake the design work, with the build in UK yards, but that offer was spurned by Ministry of Defence officials?

[Mr Brazier]

I will have to write to the right hon. Gentleman unless—[Interruption.] Ah, I have a note coming, so I shall respond to him in a little while.

--- Later in debate ---

[Mr Jones]

It is a pleasure to serve under your chairmanship, Mr Hanson. I stand before the Committee as a pro-European and I will be arguing for this country to remain a member of the EU, but the document before us today demonstrates how the EU is extending itself into areas that mean that it tests the patience even of Europhiles such as myself.

The debate around European defence is a long one. It goes back to the end of the second world war, the foundation of the Western European Union and the treaty of Brussels. We had arguments then about standardisation of equipment and pooling of defence capabilities across Europe. I agree that a cornerstone of our defence should be NATO, but even though this document reflects that, there is a way—I suspect that some Conservative Members will see this as another wicked plot from across the sea—of influencing the sovereign capability and decision making of this country. It is clear that defence matters should be for individual nation states in Europe to decide, and I understand that that is what the Government are arguing in their response to the document, but I have a problem with some of the things that are coming forward.

The first item in the document is that the Commission’s aim is to have an internal market for the defence industry. Thanks to the actions of the previous Labour Government, of which you were a member, Mr Hanson, we have one of the most open and competitive defence markets anywhere in the world. We have only to look at the companies that have now based themselves here or worked with existing capacity here to see why we have that open and competitive market. Finmeccanica, Thalys, Boeing and General Dynamics are just a few of them, and that is because the Labour Government’s approach was that our market should be open not just to Europe, but to the world. I argue strongly that this country, in terms of defence capability, has benefited from that process. The danger with the approach taken in this document is that we look at defence or defence manufacturing as though a fence can be put around it in terms of just Europe. That is not the case. It is a global, international market these days.

[Mr Spellar]

My hon. Friend rightly identifies some of the benefits from engaging with the wider defence industry. However, there has to be some payback for that—some degree of equity. Does he therefore share my frustration at the failure of the United States in this regard? Despite the fact that Brimstone is far and away the most effective weapon—it is favoured, actually, by the United States air force—it is being blocked within the system because of narrow industrial interests. Does that not cast a slight shadow over the wider co-operation that my hon. Friend rightly identified and welcomed?

[Mr Jones]

It does. My right hon. Friend and I spent a week in Washington trying to persuade US Congressmen and Senators to make sure that there was nothing wrong in ensuring that technology transfers should be a two-way street. The problem is that although a lot of claims are made about the US defence market being open and transparent, anyone with experience of it knows that protection is clear.

Such protection, however, comes up in Europe. The document talks about overcapacity in the European defence industries, but there is a reason for that: the protectionist policies of certain members, including France, Germany and others. They have not opened up their markets, not only not to US and international competitors, but also not to UK companies. There have been some good examples, as the Minister rightly pointed out, of good defence co-operation and manufacture between European nations and our own, which have been of benefit to not only those nations, but ours.

The objective, according to the document, of

“an Internal Market for Defence where European companies can operate freely and without discrimination in all Member States”,

is frankly pie in the sky. The idea that the French defence market or shipbuilding industry, for example, will be open to competition throughout Europe is unrealistic. A few years ago in Paris, when I was a member of the Defence Committee, I asked the Member for Brest whether she envisaged a French aircraft carrier being built anywhere other than Brest. She looked at me quizzically and said, “I don’t understand the question.”

The Commission is pressing forward in that area, and that has real dangers for our defence industries. It is not, frankly, an area in which the Commission should be getting involved. I fully support, as the Minister does, existing co-operation in the EU for operations that lie outside NATO or involving other countries, but that is where it should stay. If the market comes into our defence industries, that will block off a lot of the opportunities that this country has for co-operation not only with the United States, which is an important market, but with other growing markets around the world. For example, in the south-east Asian market, the easy transfer between civilian technologies and defence ones brings capabilities that could benefit our defence industries. If they are somehow locked out, because our procurement is restricted to Europe, not only will our defence industries suffer, but so could what is on offer to the men and women of our armed forces.