Defence Reform Bill

Debate between Lord Palmer of Childs Hill and Lord Tunnicliffe

Tuesday 25th February 2014 Grand Committee

[Lord Tunnicliffe]

My Lords, in moving Amendment 18P I will speak to the rest of the amendments in this group. The points I want to make are simple, but I look forward to the reply I shall receive to these simple ideas.

The group essentially refers to Clauses 19 and 20. Clause 19 addresses the issue of the contract profit rate and, essentially, the amendments would require that the rates must be set by regulation each year. Amendments 23A and 23E turn this into an affirmative-procedure process.

More interesting is Clause 20, “Allowable costs”. As the report of the noble Lord, Lord Currie, points out, we have over the years had a lot of debate, effort and negotiation into the contract profit rate which, typically, is 10%—pedantically, it is 9%—of the total price; and too little, one might argue with the benefit of hindsight, into the issue of allowable costs, which represent 90% to 91% of the total price. Therefore, Clause 20 properly addresses this issue.

Subsection (1) states:

“The SSRO must issue guidance about determining whether costs are allowable costs under qualifying defence contracts”.

Subsection (2) attempts to define allowable costs. It is important to emphasise that these are the big bucks. This is where the big money is in the contract. This is 90% or more of the total price. The guidance we get from the primary legislation is that they must be appropriate, attributable to the contract and reasonable in the circumstances. Much as I praise this part of the Bill—and I do as it is a really good attempt to address this extremely difficult issue—I cannot but be amused by these three descriptors of one of the most important elements. I remember that when I was privileged to be in the noble Baroness’s position, whenever an official used the word “appropriate” in my response, it meant we did not have an argument, so I dismiss subsection (2)(a) as pretty well irrelevant. I do not have a lot of time for paragraph (b) either, because if it is not “attributable to the contract”, who would in all conscience try to argue that it should be there? We are left with “reasonable”. Much as I applaud the concept of being reasonable, it is not a very full description. Therefore, inevitably, and quite properly—I am not unhappy about this—it will have to be left to the SSRO to develop guidance about it. However, surely this is so important that it should not be merely guidance but should be in regulations. Regulations of this importance should be exposed to public gaze and debate and should be accountable to Parliament through the affirmative procedure. I beg to move.

[Lord Palmer of Childs Hill]

My Lords, I, too, am worried about these words. I shall not repeat what the noble Lord, Lord Tunnicliffe, has said. It is really a question about what are allowable costs. As anybody in business knows, allowable costs can be described in so many ways. For instance, Starbucks does not pay any tax in this country because it charges its royalties from overseas against its costs in this country. Would that on a contract for a submarine be allowable costs? If the contractor is producing, let us say, one submarine, can it therefore charge all of its chairman’s, managing director’s and executive board’s salaries against the cost of that one submarine? If it is also producing a group of battleships or carriers, those executive costs, for example, would be spread over all the costs of all those items of equipment.

In her previous reply, the Minister spoke about an audit trail. The noble Lord, Lord Tunnicliffe, used the word “reasonable” and all the other adjectives. A contractor who wished to drive a coach and horses through this could do so by manipulating what could be administrative costs. It is very easy to say that if the mythical submarine requires a widget, that widget is applicable to that submarine. You can see that, but when you are dealing with, let us say, the premises for the submarine, if it is one submarine, is the contractor allowed to charge the whole of the premises costs against the cost of that submarine? If it was also building an aircraft carrier, it could charge some of that premises costs against it. I invite the Minister to come back, perhaps on Report, with some better reassurance about how allowable costs will be allocated and particularly about how to spread large costs if only one item of equipment is produced by that contractor.

Armed Forces Bill

Debate between Lord Palmer of Childs Hill and Lord Tunnicliffe

Wednesday 26th October 2011 Lords Chamber

[Lord Tunnicliffe]

My Lords, we on these Benches are content that the noble and gallant Lord, Lord Craig of Radley, is not going to press his amendment, and we are content with the outcomes on this issue. This is the last chapter in the Armed Forces Bill, and we are pleased with where it has got to. We are pleased on this issue and on the other issues where concessions have been achieved. It has been very pleasing that the Bill has engaged all sides of the House, and the contribution made by noble and gallant Lords in this specialist area has been particularly useful and has added to our debate, improving the outcome. That is also true of other people with significant service experience who have contributed.

I, too, thank the Minister for the way in which he has handled the Bill, and I thank his staff. We on the opposition Front Bench have been able to give the Bill proper scrutiny, much of it in private, which has saved time in the House, because of the co-operation that we have had. We are impressed and delighted, like everybody else, with the way in which the Minister has handled and crafted the concessions. However, it is a matter of raw political reality that this concession has come forward because of the fear of defeat in the Division Lobbies. Many of us have worked in government and we know the importance that the political reality of defeat brings to discussions. I am sure that the Minister has taken this pressure and used it very carefully. It is a matter of raw political reality that, without the fear of defeat, the PJM medal would not be worn this Remembrance Day, and it is highly probable that without the pressure of potential defeat in the Lobbies many other concessions would have not come forward.

This is a good Bill about just causes, and it is a good Bill because it has been a product of very good debates, but it is also a good Bill because of the political pressure that we have brought to bear from these Benches. The House can be properly and justly proud of this Bill, and we on these Benches are proud of our contributions.

[Lord Palmer of Childs Hill]

I would like to thank all noble Lords and particularly noble and gallant Lords for their work, and also my noble friend the Minister. The point that I would like to make is that acceptance of the Malaysian medal was approved; it was wearing it that was not. That was a rather strange situation. My only comment at the lateness of this hour is to hope that my noble friend the Minister enjoys wearing his medal at the earliest opportunity.

Armed Forces Bill

Debate between Lord Palmer of Childs Hill and Lord Tunnicliffe

Monday 10th October 2011 Lords Chamber

[Lord Palmer of Childs Hill]

My Lords, I rise as someone with no military medals, though my late father had some. I find it incomprehensible that we are not proud that service people fighting for this country were awarded medals by one of our Commonwealth nations. If we are proud that they should be awarded such medals, why should they not be allowed to wear them? It seems incomprehensible that they are not. We talk in your Lordships' House about the cost of this and the cost of that—I was told that the cost of national defence medals would be higher than I imagined—but the cost of doing this is nothing other than perhaps a dent in some civil servant’s pride. There is no reason why this House should not encourage the Government to allow people to wear medals such as the PJM medal.

Having been awarded a medal from a Commonwealth country, the recipient does not have to wear it. There is no saying that if you have received a medal from a Commonwealth country of which you might, for current reasons, disapprove you have to wear it, but the idea that you cannot wear it seems anathema.

The Bill has to go to the other place. It is not on this one amendment that it may ping-pong. Therefore, contrary to my normal loyalties to the coalition, I will vote with the noble, valiant Lords in favour of the amendment.

[Lord Tunnicliffe]

My Lords, I listened to the debate on medals in Grand Committee. I said at the end of it that our position was neutral but that I had found many of the arguments very persuasive. I have read the letter from the Minister of 23 September and welcome it as far as it goes. It is good that there is to be a review, and I am pleased that it will be relatively rapid. I apologise for not being present on Report, but I have carefully read the debate in Hansard. As a consequence, I assume that, arising out of those debates and that letter, the noble and gallant Lord, Lord Craig of Radley, and his colleagues have produced what is now a very narrow amendment about a particular anomaly.

We have taken enough time on this; I shall not repeat the arguments except to say that I unknowingly applied the test described by the noble Lord, Lord Touhig, to a peculiar group of people called the opposition Whips. I tried to explain to them that we were going to debate how the King of Malaysia had presented a medal to British soldiers, how the Queen through Her Majesty's Government had agreed that they could accept it, and how they were not then allowed to wear it. It took me 10 minutes to convince them that I was being serious, especially, as I recollect from Committee, there is one day or one week when the soldiers are allowed to wear the medal.

We will support Amendment 8. I take this opportunity to say how flexible and how positive the Minister, his fellow Ministers and their team have been throughout the Bill. I earnestly invite him to maintain that theme and accept the amendment. Unfortunately, if he is unable to do so and there is a Division on it, we will join the noble and gallant Lord, Lord Craig of Radley, and his colleagues in the Lobby.