Defence Implementation Road Map

Debate between Jacob Rees-Mogg and Julian Brazier

Tuesday 10th November 2015 General Committees

[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 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—

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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—

[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.