Defence Reform Bill

Lord Robertson of Port Ellen Excerpts

Monday 3rd February 2014 Grand Committee

[Lord Robertson of Port Ellen (Lab)]

My Lords, I declare an interest in that I work for the Cohen Group, a Washington-based consultancy led by a former Secretary of Defence, William Cohen.

I support the idea and concept of a GOCO. However, I also recognise the powerful case made by my noble friend in relation to secondary legislation. We should consider the GOCO because something radical needs to be done about defence procurement. I was Secretary of State for Defence for two and a half years, too brief a period to get to terms with the scandal that has been the continuing story of defence procurement in this country. The story of cost overruns and time overruns is deeply disturbing and worrying.

Over the past weekend, I took part in a security conference in Munich. There was a special session with a number of talented and experienced people talking about European defence and the crisis of diminishing defence budgets in the face of both existing and emerging threats. I made the point in that discussion that we were unlikely to get defence budgets stabilised or increased. Unless the case can be made to the general public that there are threats that need to be dealt with, defence budgets will continue to go down. At the moment, advocacy of the need for defence is missing.

At the same time, the case is consistently undermined by the fact that we do not use existing defence budgets properly or effectively. First, there is a multiplicity of defence projects across Europe which duplicate in many areas what we could do; a focus on items of capability which are related to the Cold War and not to future threats; and the sheer number of tanks and hopeless aircraft in the European arsenal which relate to yesterday’s enemy and not to the future. Secondly, and importantly, a large amount of money is wasted on the way in which we procure defence. As Secretary of State, I thought it was important that we should deal with that issue and look at it radically. In the strategic defence review of 1998, which I supervised, we made radical changes to defence procurement. I am sad that I did not stay there long enough to pursue it. My successors also tried and failed to get to grips with it as well. The term “smart defence” was coined by me at a press conference during my time at the Ministry of Defence, but it has become less and less smart as time has passed.

The saga continues and will do so until something radical is done. The thinking at that time was put together by me and my special adviser, Bernard Gray. He was employed by me—I took him away from the Financial Times, where he was the defence editor, in order to be my special adviser—and I frankly admit that we would not have had such a good and long-lasting defence review if it had not been for Bernard Gray’s clear thinking and his powerful purpose during that time. People criticise him now, but I believe that he is one of the few people who has the intellectual grasp and dynamic conviction to drive through the required changes. The noble Lord, Lord Levene, was appointed by Lady Thatcher to look at defence procurement, and he made a good fist of it then, but again he moved on before it could be fully put into practice. If my private sector experience since I left NATO has taught me anything, it is that execution is a critical area to focus on to get outputs instead of just excellent inputs.

The GOCO concept is certainly radical—and my noble friend is right that it is in many ways untried—but many people are watching us because many countries have exactly the same problem. We have to look at that. It is sad that the process failed, and that only one competitor—if that is the right word—was left standing at the end, but the process produced a number of proposals, as part of the tendering, that indicated that major savings could be made. There may only have been one left at the end of the day, but each competitor put forward proposals that would have saved the taxpayer money and made sure our troops got equipment much more on time. DE&S+ is second best, but it has to be tried, given the situation. The radical nature of what we have to do is utterly justified by the fact that our troops do not get the equipment at the right time and in the right form, and the taxpayer also pays well over the odds for it. If we do not think radically, the same old mess will continue.

However, my noble friend has made a powerful case for the GOCO, having been shunted into a siding, remaining there until it is a reality and we have had time to test it properly—and secondary legislation is not the right way to do that. Therefore, Amendment 25 is a good way of making sure that when the day comes, as I am sure it will, when we go down the GOCO route, there will be the proper scrutiny that the idea deserves.

[Lord Roper (LD)]

My Lords, I believe we should give consideration to Part 1 at this time, and that it should remain in the Bill. I am therefore unable to support the suggestions by the noble Lord, Lord Rosser, that these clauses do not stand part of the Bill. His points about the gap between now and when the GOCO comes into effect are important; that is why I asked the Secretary of State, when he came to see some of us, for an assurance that there would be an opportunity for Parliament to make a clear decision before Part 1 came into operation. That is why the Minister tabled Amendment 24, suggesting that there would have to be affirmative Motions in both Houses. My noble friend Lord Palmer and I have added our names to that, because it is in response to the request that we made to the Secretary of State. Since then the noble Lord, Lord Rosser, has tabled Amendment 25.

The case for a super-affirmative resolution needs to be examined. It will be useful between now and Report to consider the value and possibilities of such a procedure, perhaps making rather more explicit the scrutiny which would be given in this House, as well as by the Defence Committee of the House of Commons, of any proposal at the time when it is put forward. The super-affirmative procedure is a useful development of recent years, and there is a case for its consideration.

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[Lord Astor of Hever]

I tabled our amendment after approaches from a number of noble Lords from different parts of the House who wanted to allow any future Government flexibility with which to introduce a GOCO, if that was thought to be the best thing at the time. In reply to the noble Lord’s question, one simply would not have the legislation without the commencement.

[Lord Robertson of Port Ellen (Lab)]

Can the noble Lord reflect after this debate on the fact that in the House of Commons, as the Commons Library statement says:

“Several amendments relating to the GOCO (Part 1 of the Bill) were tabled for Report Stage but were subsequently not called. Instead the main focus of the Report Stage was on the Government’s plans for the Reserves”?

So there was limited scrutiny in the House of Commons of this part of the Bill. Now the Government are proposing to promote the idea that a GOCO will be a matter for secondary legislation and affirmative resolution. Can the Minister take away the fact that in this sitting, we have had a former Chief of Defence Procurement, a former Chief of the Defence Staff, a former Minister for Defence Procurement and a former Secretary of State saying that, on balance, although they are in favour of radical reform, they all think that Amendment 25 is actually the best way of proceeding? Would it not look rather odd after that if the Government were to say, “We will ignore the advice that we have been given at that level, and arrogantly go ahead with a procedure that is perhaps inadequate”?

[Lord Astor of Hever]

My Lords, I will certainly reflect on that. We never ignore advice given by the people that the noble Lord mentioned. I am very happy to organise a meeting to discuss the issue, if he feels that that would be a way forward, before Report. I will certainly take it away to reflect on it. I have just been told there were eight sittings on this issue in the House of Commons.

The noble Lord, Lord Davies, said that cost-plus is the most appropriate type of contract for this class. The GOCO will have the commercial expertise that the MoD does not possess to identify the most appropriate contracting arrangements. In future, budgets will lie with the commands, ensuring that we can more quickly respond to changes in equipment requirements. The noble Lord asked about contracting arrangements for first-class major equipment. The target cost incentive fee contracting arrangements are one of the options available to the MoD for the reasons that he described and will continue to be utilised where they are the best option to deliver and support equipment procurement.

In the light of the government amendment and the points that I have just set out, I commend Amendment 24 to your Lordships; I will take away the point that the noble Lord, Lord Robertson, mentioned; and I urge noble Lords not to press Amendments 17 and 25.

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[Lord Astor of Hever]

I shall certainly write. I said that officials were in discussions with Her Majesty’s Treasury and the Cabinet Office regarding the nature of the delegations required within the DE&S budget. As far as I am able, I will write as detailed a letter as possible to the noble Lord and make sure that copies are sent to all other noble Lords who have taken part in this Committee. I can reassure the noble Lord, Lord Robertson, that I will organise a meeting to see whether we can come to some meeting of minds. We all want to do what is best for the Armed Forces and for procurement. I shall organise that meeting as quickly as I can.

On Amendment 6, I am grateful for the points raised by the noble Lord. I fully accept the critical importance of protecting the interests and integrity of decision-making within the Ministry of Defence and wider government by maintaining the highest standards of propriety of those Crown servants within the Ministry of Defence, which includes civilian staff as well as members of the Armed Forces, who interact with defence contractors. I believe strongly that the integrity and propriety of those Crown servants who may be in a position to influence decision-making should be seen to be beyond reproach.

However, I must resist the inclusion of the amendment as the issue is already effectively addressed. The code of conduct that the noble Lords wish to include seeks to address general concerns that senior government officials could be perceived to be in conflict or have vested interests when dealing with defence contractors in their day-to-day work. Further, the noble Lord, Lord West of Spithead, in his evidence session of 3 September to the House of Commons, also made mention of Title 10 of the US code, the section of the code relating to the Armed Forces of the United States.

The code of conduct that the noble Lords seek already exists within the Ministry of Defence in two forms. The first is in the form of the business appointment rules, which govern situations in which Crown servants wish to take up a relevant offer of employment within two years of leaving the Ministry of Defence. The second is the gifts, reward and hospitality rules, which govern situations in which Crown servants are offered a gift or hospitality. Together, these two important sets of rules set out the standards of conduct expected of Crown servants within the Ministry of Defence. For civilian officials within the Ministry of Defence, both the business appointment rules and the gifts, reward and hospitality rules are contained within the Civil Service Management Code, which was issued under Part 1 of the Constitutional Reform and Governance Act 2010. For military officials, the rules are contained within the Queen’s Regulations for each of the services, and the provisions of the business appointment rules have been in effect since July 1937.

The Civil Service Code states that civil servants must not accept gifts, hospitality or benefits of any kind from a third party that might be seen to compromise their personal judgment or integrity. The Queen’s Regulations lay down the conduct and procedure to be observed by service personnel on the acceptance of gifts, rewards and hospitality. In all cases, any offers of gifts or hospitality must be registered by the individual in receipt of the offer. The provisions of the business appointment rules for both military and civilian officials differ depending on the seniority of the individual, with the most senior officials requiring permission from the Prime Minister to take up an appointment following the end of their service within the Ministry of Defence.

The specific provisions of the business appointment rules are as follows. For the most senior officials in the Civil Service—at three-star level or their military equivalents—the rules require that they submit an application, which must be referred by the department to the Advisory Committee on Business Appointments, which will provide advice to the Prime Minister to enable a decision to be taken. Due to their role at the highest level of Government and their access to a wide range of sensitive information, all Permanent Secretaries will be subject to a minimum waiting period of three months between leaving paid Civil Service employment and taking up an outside appointment or employment. As a general principle, there will be a two-year ban on civil servants at three-star level and above lobbying the Government—communicating with a view to influencing a government decision or policy in relation to their own interests. For civil servants at two-star level and their military equivalents, the rules require that an application be made to the Permanent Secretary, who is responsible for making a decision and providing a written recommendation to ACOBA—the Advisory Committee on Business Appointments.

[Lord Robertson of Port Ellen]

The Minister was reading rather quickly. Did he say that the quarantine period was to be three months only?

[Lord Astor of Hever]

Yes, I did. I shall be able to answer the noble Lord’s question at the end.

Applications from one-star level and below and their military equivalents are considered internally within the MoD. An application at these levels is required only if the individual’s circumstances mean that, in their last two years of service, they have been subject to one or more of the following: first, they have been involved in developing policy affecting their prospective employer, or have had access to unannounced Government policy or other privileged information affecting their prospective employer; secondly, they have been responsible for regulatory or any other decisions affecting their prospective employer; thirdly, they have had any official dealings with their prospective employer; fourthly, they have had official dealings of a continued or repeated nature with their prospective employer at any time during their civil service career; fifthly, they have had access to the commercially sensitive information of competitors of their prospective employer in the course of their official duties; sixthly, the proposed appointment or employment would involve making representations to, or lobbying the Government on behalf of a new employer; and seventhly, the proposed appointment of employment is consultancy work, either self-employed or as a member of a firm, and they have had official dealings with outside bodies or organisations involved in their proposed area of consultancy work.

The number of applications made under the business appointment rules is relatively modest and has averaged around 200 per year over the past five years across grades 1 to 4. For example, in 2012-13 there were 258 applications, of which 172 were approved with conditions, and the rest approved unconditionally.

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In summary on this amendment, the extant MoD policy already contains the required protection against perceived conflicts of interest or impropriety that this new clause is seeking to achieve, and it is therefore not needed.

[Lord Robertson of Port Ellen]

I do not want to pre-empt my noble friend, but there is an air of astonishment around the Grand Committee that the Minister said that Permanent Secretaries have only three months before they can take up some paid employment. If that is what is being said, it is a remarkably short period. Who wrote that rule? Was some Permanent Secretary responsible for it? If that is the case, there is a real cause for alarm that junior civil servants are being constrained in a remarkable way but Permanent Secretaries at that level seem to be given a remarkably short period before they can take up a new job. I have to say that I am profoundly sceptical about the operation of the committee on business recommendations, or whatever it is called, because it is completely toothless. It can make recommendations that senior people in government are not obliged to follow. The current record is that quite a few people completely ignore the recommendation and time limits, even the three months that is talked about. Perhaps the Minister would like to explain.

[Baroness Garden of Frognal (LD)]

Can my noble friend clarify whether the minimum three months would relate to an employment which was absolutely nothing to do with the previous work? In practice, people who go to work for defence contractors tend to have to wait considerably longer than three months before they can take up that appointment, do they not?