Defence Implementation Road Map

Jacob Rees-Mogg 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.

[The Chair]

Order. This is a statement. The hon. Gentleman may give way later during the debate.

[Mr Rees-Mogg]

Nevertheless, the new Committee concluded that the issues remained live, and that a debate was still appropriate. In so concluding, the Committee hoped that this debate would enable the Minister to bring the House up to date on developments in all the areas encompassed by the report, demonstrate how UK interests have been protected thus far, and outline how he envisages this road map now being taken forward and how UK interests will continue to be safeguarded.

[The Chair]

I now call the Minister to make an opening statement. As was the case with the Member who introduced the debate, it will be a statement and questions will be taken afterwards.

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[Mr Brazier]

We regularly review our membership of the EDA. The most recent study took place after I became a Minister. It is a relatively small budget and a simple tactical choice. In fact, one EU country chooses not to participate: Denmark. The choice is entirely pragmatic. At the moment, the small budget spent offers value for money, we feel, because in a number of areas we can see that savings are provided. The EU is not a competitor with NATO, at least not as we are formulating it, but having the EU as a forum where we can discuss participation in various collaborative projects—my hon. Friend the Member for North East Somerset mentioned collaboration—intellectual property rights, dual use and so on, provides good value in some areas. We do not have an ideological commitment to remain a member, but an independent study has looked at it in the past 12 months and we believe it offers good value for money.

[Mr Rees-Mogg]

Is it too suspicious to think that what the European Commission is trying to do is to set the groundwork for the common European army that it has been talking about in other contexts, and that procurement is, because of the over-supply, a relatively easy first step to push into?

[Mr Brazier]

There is no question of this country ever agreeing to be part of a European army. There is absolutely no question of that. From time to time, we have taken part in successful EU military ventures—mostly small-scale—in which, for one reason or another, NATO has chosen not to operate. At Northwood, which I visited several times before I was a Minister, we have the headquarters of the EU’s anti-piracy effort, for example, which has been extremely successful. There is no question of a European army, navy or air force.

Procurement is an area where there is scope for savings. We have massive overcapacity in the European defence industry, so it is in our interest to find ways of reducing it.

[Mr Rees-Mogg]

I am grateful to my hon. Friend for that answer. Will he say how much of that overcapacity might be used up if other NATO members managed to meet their 2% of GDP spending target, and whether that might not be part of the solution, rather than having an internal market for defence?

[Mr Brazier]

I am not quite clear why my hon. Friend is making a contrast here. This country is absolutely clear: we believe that every NATO member should spend 2% of GDP on defence. Of course, not all NATO members are in the EU and not all EU members are in NATO. We have set an example and we are one of the five NATO countries that spend 2% of GDP and are firmly committed to that. I do not see why that is somehow an alternative to the view that, at a time when, first, we have massive overcapacity in the European defence industry and, secondly, we have some of the best and most competitive defence operators in this country—in fact, the second biggest defence industry in the free world after America—we should, subject to the carefully ring-fenced areas of our security, have an internal market here and encourage more competition. That seems to me self-evident. Our defence industry is likely to benefit and it offers better value for money in western arms purchases.

[Mr Rees-Mogg]

But if we are to have an internal market, does that not begin to bring in the single market rules? It may well be in the interests of this nation to support an uneconomic defence manufacturing industry because of the need for certainty of supply at a time of war which may be unpredictable. I seem to remember that during the first Gulf war, Belgium would not supply bullets—

[Mr Kevan Jones (North Durham) (Lab)]

Hand grenades.

[Mr Rees-Mogg]

The hon. Gentleman is as helpful as ever. Belgium would not provide hand grenades to British forces. Can we really risk being in a situation where these decisions are in any way constrained?

[Mr Brazier]

Nobody has ever challenged the British Government. I understand there has never been a court case in which we have sought article 346 protection for a decision on defence procurement—not once. Article 346 is our protection on that. From memory—it was a long time ago and I do not want to frighten my officials—it was shells that Belgium would not provide, not hand grenades. However, in any area where we feel that security of supply is essential—shipbuilding is one such area—we can claim article 346 protection. As I said, it is fairly rare that article 346 claims have been challenged for any country, and no one has ever tried that when Britain does it. I have one last background point: article 346 today covers roughly 10% of all our defence procurement spending, so it is not a trivial, peripheral, last-resort thing.

[Mr Rees-Mogg]

rose—

[Martin John Docherty (West Dunbartonshire) (SNP)]

rose—

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[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.

[Mr Rees-Mogg]

I want to come back to what I was asking about before. I absolutely accept the Minister’s argument about article 346, which is extremely important. My concern is that if we involve the EU in helpful restructuring of the defence industry, rather than leaving it as a domestic competence, the EU is then getting access to an area from which it has previously been kept out but that is within its normal areas of competence. That extends to the discussions of whether exports should be looked at by the European Union, which the Defence Committee and the Government rejected, but is being proposed—

[The Chair]

Order. This is question time. There is an opportunity for debate later, but it is questions now.

[Mr Rees-Mogg]

It is a question, Mr Hanson. Sorry, it was quite a long question.

[Mr Brazier]

I will answer both questions—I am now in a position to answer the question but by the right hon. Member for Warley. The short answer is that the Italian offer was too expensive. There is always that decision to make. In placing defence orders, we sometimes buy abroad, but those for core warships are always placed in this country, as they always have been by all Governments, whether Conservative, Labour or coalition. In that case, it was simply too expensive.

In answer to my hon. Friend, I absolutely understand his point, but I assure him that that is not a risk. Let me say that again: nobody—repeat, nobody—is giving the European Commission any kind of competence in the area. What we have agreed to is voluntary—it is a voluntary agreement, of which Denmark has chosen not to be part—and that is to be part of the EDA, which offers speed-dating opportunities that can assist the market in clearing up overcapacity. So it will help bring together companies that can work together usefully to save money, sometimes to agree reciprocal purchase—“We’ll buy some of that from you, rather than developing it ourselves, if you buy this from us,” and so on. It is speed dating through the EDA and not the Commission developing any kind of Commission competence, a subject on which I entirely agree with him.

[Mr Rees-Mogg]

I am grateful to my hon. Friend. Therefore, that is entirely intergovernmental, and the institutions of the European Union, such as the Court of Justice and the Commission, are not involved. Is that correct?

[Mr Brazier]

The EDA is an intergovernmental agreement. Denmark is not a member, although Denmark is a member of the EU. I tried to make it clear from the beginning of my speech that the Government’s policy is to stop the Commission from expanding its competencies. From time to time we review our membership of the EDA; it has a small budget, which is doing useful work in a number of areas. It has saved us money—I mentioned two or three of the areas where it has done so—but we are not allowing the Commission to develop an industrial or a defence industrial policy for Europe. We have no intention of doing so.

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[Mr Brazier]

I do not think I have got an answer for that beyond saying that I and the Government share the concerns of some on this Committee, as I made absolutely clear in my opening remarks, that there may be an attempt by the Commission to extend its competencies. We have resisted that at every stage, and may have to do so again shortly after Christmas. The hon. Gentleman is absolutely right about the EDA. It has produced a series of good ideas for small-scale savings which offer a good return on money. It is not a threat.

[Mr Rees-Mogg]

I am sorry to belabour the point, but in the document, “Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A New Deal for European Defence”, the introduction sets out that the ambition is

“an Internal Market for Defence”.

That is what I am so concerned about, and I hope that the Government are clearly rejecting that. The thing about European exceptions is that they cease to be useable if they are not enforced the whole time. I may give examples of that in a speech later.

[Mr Brazier]

I do not think I can add a great deal to what I have already said. We support the internal market. This is not an industrial policy; it is about pushing back trade barriers. The Government support that and see it as an extremely positive thing for us and our fellow countries in Europe. We are quite clear that we have this exemption for defence, and we have deployed it a number of times. It covers roughly 10% of our defence procurement effort, and we have never once been challenged on it. Competitors are normally the ones who would make a challenge, and no one has ever tried to challenge Her Majesty’s Government’s exercising of their rights on that.

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[Mr Jenkin]

When considering this instrument, it is worth noting first that the document is dated 26 June 2014. That we are dealing with it at such a late stage is an indication of how poor our scrutiny arrangements are and how incapable we are as a Parliament at keeping up with developments in the European Union.

[Mr Rees-Mogg]

Will my hon. Friend give way?

[Mr Jenkin]

I am making absolutely no personal criticism of my hon. Friend, and I give way to him on that basis.

[Mr Rees-Mogg]

I am grateful to my hon. Friend for giving way. The document was recommended for debate by the European Scrutiny Committee about a year ago. The coalition Government refused to send documents for debate, and a huge backlog built up. Much of that is now being cleared by this Government, and I hope that more work will be done. It was not a failure of our processes; I am afraid it was a failure of Her Majesty’s Government.

[Mr Jenkin]

I am very grateful for that information and I am sure the Committee is, too. I was about to say that this is the first occasion, apart from a Government statement after the 2013 Council of Ministers meeting, that we have debated the 2013 conclusions in any depth. That underlines a serious state of affairs.

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[Mr Rees-Mogg]

May I congratulate the hon. Member for West Dunbartonshire on his maiden speech in a Committee, and say what a pleasure it was to hear that the Scottish National party is now committed to NATO? I thought that used to be in some doubt, but clearly not. Times change.

There are some clear points surrounding this whole debate. The first is that the official bodies of the European Union want to develop more a common defence policy and want to see themselves, or the European Union, as the main form of defence within the EU. I quote in evidence, from the papers before us today, the letter from the Minister to the Chairman of European Scrutiny Committee dated 23 July, so it is reasonably up to date. It is about the High Representative’s report on CSDP and is on page 73 of the bundle. It is useful to remember that Federica Mogherini is not only the High Representative but Vice-President of the Commission and head of the European Defence Agency, so a number of hats are being worn together—I assume that she does not have one on top of the other, but perhaps there are bows coming out of her hat.

What the Minister said in relation to the report—in criticism of it—was fourfold. He said:

“The report did not bring out clearly enough that Member States have primacy over defence issues.”

That is important because it is an indication of where the Vice-President of the Commission and the head of the European Defence Agency is trying to push policy—it is about trying to downplay the importance of member states and increasing the role of the European Union.

The second point that the Minister criticises is that

“EU-NATO cooperation was not given enough weight.”

That is exactly the point that my hon. Friend the Member for Harwich and North Essex was making—that the EU is not that keen on NATO and sees itself to some extent as a committee.

The third point of disagreement—in a way, the nub of what today’s debate has been about—was:

“The proposals on the role of the EDA went beyond what Member States have previously agreed”.

That is central because it is what we have seen in every development of European policy. The whole way the EU has developed from the European Economic Community in 1972 when we joined is by the Commission pushing forward particular issues and taking them beyond what has been agreed, which is what I think the Green Paper does as well, to try to extend EU competence.

The fourth point of disagreement is that

“There was insufficient evaluation of the value added by CSDP missions and operations.”

Even in the absence of evidence of it being useful, the aim is for more Europeanisation. So that is the first point surrounding the debate—that the aim of the EU is clear.

The second point is that what is going on in defence and has gone on in defence is, in the broad European context, highly unusual. Although it is exempt from competition policy, from some of the requirements of the single market and, indeed, trade policy, trade policy is the exclusive competence of the EU with the exception of defence, so that in the ordinary business of the EU, a lot of what is exceptional in defence procurement is ordinary in everything else—it is basically EU competence.

That leaves the third point, which is held by a horsehair thread as far as I can see—article 346. The Minister is right to rely on that, to be robust on it and to remind the Committee that it has not been challenged, as far as the UK is concerned, by the Commission. Where I diverge from him is that I think when we look at the broad policy background, we look at the ambition of the EU, and all we have to defend defence procurement is article 346. We should be incredibly cautious about any development of policy in the context of the EU that allows for more activity in the defence field.

The Minister said that he thought that it was broadly uncontroversial for EU nation states to combine for defence purposes. I do not disagree with that for a moment, with one caveat, which is that it is on an intergovernmental basis and not under the auspices of the EU.

[Mr Jones]

May I suggest that there is another way that the EU nation states combine very effectively, which is on a commercial basis—an example being Thales and Finmeccanica?

[Mr Rees-Mogg]

I agree with that, although I think that the Government should have the right to be protectionist in relation to defence procurement. I am not sure it is always wise to be protectionist. I am a supporter of having bought ships from South Korea. That was a sensible thing to have done in the broader context. I am in favour of maintaining freedom of activity rather than saying that it is always wrong to buy from overseas.

The final point I am making is that intergovernmental co-operation is admirable. When we are dealing with issues that NATO does not want to deal with, it makes complete sense to co-operate with our nearest neighbours and to use that projection of force where it can be used. I absolutely agree with the Minister that on the issue of Ukraine, a variety of agencies needed to be involved, but what never needed to happen was for defence to come under the auspices of the EU, formally or informally. It is a great protection from the general ratchet effect of what happens in the EU if the Minister is robust. I am reassured that we have one of the most robust Ministers before the Committee today.