Defence Reform Bill

Jim Murphy Excerpts

Tuesday 16th July 2013 Commons Chamber

[The Secretary of State for Defence (Mr Philip Hammond)]

I beg to move, That the Bill be now read a Second time.

The defence of the United Kingdom and the protection of our national interests must be the priority of any Government. The brave men and women of our armed forces do an exceptional job, and I am sure all Members of the House will wish to pay tribute to their dedication, and to the sacrifices they make not only on operations but, as the tragic events in the Brecon Beacons at the weekend reminded us, on a daily basis.

The armed forces can perform their vital role only if we provide them with the capabilities they need to operate effectively and safely. We have a duty to them to ensure they have the tools they need in terms of manpower, training, equipment and logistical support. At the same time, we must deal with the black hole we inherited in the defence budget, and the Ministry of Defence has had to contribute its share to the broader challenge of correcting the public sector structural deficit.

[Mr Jim Murphy (East Renfrewshire) (Lab)]

I wish to respond not to the Secretary of State’s discordant point but to address his earlier comment and say that Her Majesty’s Opposition wholeheartedly share the expression of sympathy offered by the Secretary of State about events in Brecon. I know there are limits to what he can say at this early stage because it is subject to a police inquiry, but can he share any more details with the House about his understanding of those tragic events? In particular, there have been suggestions that training regimes may recently have been altered as part of efforts to boost the number of reservists, but I suspect that they are unfounded. Will he say what he feels he can say at this early stage?

[Mr Hammond]

I understand that the right hon. Gentleman desires to get to the bottom of this matter—as do we all—but he is right that there is little I can say. An inquiry by Dyfed-Powys police is under way, and when it is complete there will be a service inquiry into the events of last weekend. We will get to the bottom of what happened, and if there are systemic lessons to be learned, we will learn them. I give the right hon. Gentleman an undertaking that once the inquiry is complete, I will report to the House in an appropriate way.

The need to address the public sector structural deficit and the deficit in the defence budget has meant tough decisions and a relentless focus on squeezing more capability out of what remains the world’s fourth largest defence budget.

--- Later in debate ---

[Mr Jim Murphy (East Renfrewshire) (Lab)]

Like the whole House, I listened intently to the Secretary of State’s necessarily detailed analysis of the specific points he announced in advocating the Bill. At the start of his speech he reflected on the tragedy in Brecon, and I associate the Opposition with his comments. After the controversy relating to today’s Health statement, I wish—I suspect to your satisfaction, Mr Deputy Speaker—to seek a more consensual approach to the tone of our debate. The principles driving the reforms in the Bill have the potential to unite all parts of the House.

Reform to defence procurement is vital to ensuring value for money, while upholding the highest possible standards and timely delivery of world-class equipment to our personnel. It is essential that increasing the number and enhancing the role of the reserve force be a success, in order to strengthen our front-line Army capability at a time when it has been subject to cutbacks. The Opposition’s aim is to ensure that these objectives are met through effective delivery, scrutinising the military as well as the financial implications of the Government’s proposals.

On Government-owned contractor-operated procurement, it is crucial that defence procurement practices be modernised to serve both the front-line overseas and the bottom line back home. Both parties agree that some of the issues that have plagued defence procurement have been insufficiently tackled by successive Administrations. In all Governments, momentum on modernisation has been lost. Major projects such as Eurofighter-Typhoon have grown greatly in cost and have been delivered years late. The roots of that lay in the late Baroness Thatcher’s Administration, showing just how far back some of these issues go.

Shared blame, however, is not as important as shared resolve, which is necessary to achieve meaningful reform. Such reform will come from greater professional project and programme management within Defence Equipment and Support, faster decision making, fuller accountability for outcomes, and longer-term integration of military expertise.

The Opposition are genuinely open-minded about the management structure that will deliver this change, which is why we accept the proposed legislation that will enable a GoCo model to be established. Supporting assessment of GoCo’s feasibility, however, is not the same as supporting its creation. The comparison between a GoCo and DE&S-plus, as it is inelegantly named, should, we believe, be based on the following principles.

First, reform must strengthen value for money within programmes, with industry adhering to targets on time and on cost. Secondly, the chosen procurement management model must retain parliamentary accountability for decision making—the point made by my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart)—so that oversight and scrutiny of multi-billion pound contracts is not hampered, but if possible enhanced. Thirdly, any change in management model must protect the rights of staff and engage with their trade union representatives, and finally, the procurement process should be characterised by talent and skill, with clear lines of responsibility, proper reward and career structures and a culture of consequences for those tasked with project management. Within that, military expertise has to be maximised without a single-service interest dominating decision making. The Opposition welcome a rigorous examination of all the options for achieving that and wish to see a genuine comparison made between the two options of GoCo and DE&S-plus.

[Mr Arbuthnot]

I am delighted with the right hon. Gentleman’s tone. I do not want to put words in his mouth, but can I take it that he has no objection, in principle, to a GoCo, but that he wishes to see how it works out in practice?

[Mr Murphy]

The right hon. Gentleman anticipates my point entirely. We wish to see reform. It is difficult to defend the status quo, which, despite the many efforts of the professionals involved, has ill suited successive Governments and has not delivered value for money. In addition to testing the logic of GoCo and DE&S-plus against the three principles I mentioned, we will consider the points the Defence Committee raised.

Further to the point made by the right hon. Gentleman, it is important that the comparison be genuine and be seen to be genuine. I say gently to the Secretary of State, however, that so far he has failed to guarantee that the Government will publish the findings of the two value-for-money studies. I hope they will take the opportunity, today or in Committee, to commit to doing so. It is essential that Parliament, industry and our armed forces have full confidence that affordability is a determining factor in this process, but that can be achieved only if we have public transparency in the findings prior to a final decision being made and Members being asked to vote in favour.

I hope, too, that we will receive reassurances about the role of Parliament and the National Audit Office in scrutinising the internal decision-making process of a GoCo. It is understood that the Secretary of State is ultimately accountable—to be fair, he said the same again today—but the decisions taken by the contractor in the handling of multi-billion pound projects should not be free from public oversight. It will also interest the House to know how reform will impact on one of the centrepieces of the 2011 Levene review, which was for service chiefs to

“take responsibility (and ultimately own the budget) for detailed capability planning”.

Any enhanced power for a contractor could contradict the increased control over budgetary management and planning given to the service chiefs.

[Mr Philip Hammond]

I am happy to clarify that point. As the right hon. Gentleman knows, we are in the process of devolving budget responsibility to the front-line commands, including responsibility for equipment procurement and support, starting with the smaller equipment procurement projects, but eventually including all but the very largest and most strategic. They will be the customers for the GoCo, just as in the current model they are the customers for DE&S. One of the disciplines that the proposed change will introduce is a harder boundary between the customer and the provider. At the moment, we suffer from a permeable boundary that allows decision making sometimes to be a bit woollier than it should be.

[Mr Murphy]

I thank the Secretary of State for that genuinely helpful intervention. In Committee, we will have to interrogate the expertise of the civil servants operating at that interface. I mean no disrespect to anyone, but they are up against remarkably talented negotiators with an entirely legitimate commercial interest, so we have to get that interface right. The simplicity the Secretary of State spoke about is important.

[Mr Hammond]

I apologise for intervening on the right hon. Gentleman again, but that is exactly the point: the civil servants and the military people in the front-line commands—who are the customers—will interface with DE&S-plus or GoCo, which is their service provider. It is the service provider that will have to deal with the hard-nosed negotiators of the multi-billion pound international defence companies, and which will need to hire and fire in the marketplace at market rates in order to face them across the table on a level playing field—if I may mix my metaphors.

[Mr Murphy]

We are looking for a level playing field and a level negotiating table—if a metaphor it is—because this issue is so significant. I welcome what the Secretary of State said about hopefully simplifying and strengthening the process. However, procurement might have become a little more complicated as a consequence of a speech given today by the Chief Secretary to the Treasury in another place—which would normally mean the second Chamber, but which on this occasion appears to mean the Royal United Services Institute. We are pretty clear: Labour have always said that we are committed to the minimum credible independent nuclear deterrent. Actually, I should correct myself: we have not always said that.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I think it has always been the case for you, Mr Murphy.

[Mr Murphy]

You know me well, Mr Deputy Speaker. Since we were serious, we have always said—[Hon. Members: “Ooh!”] Sorry: since we are being serious about our nation’s defence and have a passing affection for the public’s opinion, we have always said that we are committed to the minimum credible independent nuclear deterrent, which we believe is best delivered through a continuous at-sea deterrent. It would require a substantial body of evidence for us to change that view, but the review published today does not appear to offer such evidence. We will continue to scrutinise today’s report on the grounds of capability, cost and disarmament. Labour will also continue to look at ways in which a minimum, credible, independent nuclear deterrent can be delivered most efficiently, based on protecting our capability, delivering value for money and advancing disarmament objectives.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

If you will permit me for a moment to continue straying off the topic slightly, Mr Deputy Speaker, may I put on the record the fact that the shadow Defence team deserves a great deal of credit for keeping both sides of the House on the right path, both for the thousands of jobs in my constituency and for our future defence for generations ahead?

[Mr Deputy Speaker]

Order. May I suggest to the hon. Gentleman that he should try to hold back his speech for tomorrow? I would not want him to use it all up today, and I think he got the point across.

[Mr Murphy]

I take your strictures about our not using the speeches we intend to give tomorrow, Mr Deputy Speaker, but I am not making a speech tomorrow—my hon. Friends will be speaking then—so I thought I would say it today.

The point I am making is about procurement, GoCo and DE&S-plus, and the complexity of the deterrent programme in that process. However, what we have learnt today is that the Lib Dem part of the Government has taken two years to review a policy and spent thousands of pounds of taxpayers’ money, only to conclude that the Lib Dems’ past policy was unachievable. Today they appear to have managed to advocate both a Trident-based system and part-time unilateralism simultaneously. That is a real achievement. The British people will marvel at the incompetence of suggesting that we should pay tens of billions of pounds to send boats to sea, while the media are now being briefed that on occasion they will not even carry missiles. That is like someone having a new, expensive burglar alarm at their home with no batteries and a sign above the door saying, “Come on in—no one’s at home”.

[Martin Horwood (Cheltenham) (LD)]

The right hon. Gentleman must understand and be accurate in his descriptions. This was not a Liberal Democrat review; it was a review by the Government, insisted on by the Liberal Democrats, which says:

“The analysis has shown that there are alternatives to Trident that would enable the UK to be capable of inflicting significant damage such that most potential adversaries around the world would be deterred.”

Credibility—

[Mr Deputy Speaker]

Order. We are in danger of running tomorrow’s debate today. I do not want to do that; I want to get back to the Bill. [Interruption.] No, you are taking the bait, Mr Horwood. It is no use looking to Mr Murphy; we know he is not here tomorrow, but you will be.

[Mr Murphy]

Thank you, Mr Deputy Speaker. To be fair to the hon. Member for Cheltenham (Martin Horwood), it was impossible for him not to take the bait. [Interruption.] The Secretary of State sensibly says, “He’s the only Lib Dem here.” There is no audience, as it were, from his party for him to perform for, although the Chief Secretary to the Treasury will make the Lib Dems’ policy clear tomorrow in the Chamber—I hope. However, there is an issue—I will finish on this matter after this point, Mr Deputy Speaker—about how taxpayers’ money has been used to inform a Lib Dem process. I accept that the Government will say that the review is a Government document, but it was intended to inform the Lib Dem manifesto.

One of the primary arguments for a GoCo is its supposed ability to attract and retain higher skills and prevent a loss of talent from DE&S. The Opposition are clear about the need to increase the skill levels in our armed forces, but we recognise that this requirement limits itself to those in uniform. Those at the front line of defence procurement within government should be the equal in experience of those within industry—a point to which the Secretary of State has alluded. We will carefully scrutinise the procedures in place to ensure that the assessment phase is fair and transparent, and that sufficient controls are in place to ensure that those involved in the possible preparation of a GoCo cannot immediately go and work in that GoCo, a point to which we will return.

While we are on this theme, it seems unacceptable that the Government have not yet fully published their findings on The Sunday Times revelations on cash for access within the Ministry of Defence. The Secretary of State, of course, wrote to me on the matter, explaining the outcomes, but this was a private letter and I was not at liberty to disclose its contents and have chosen not to do so. I think it important, however, for the Secretary of State to provide the full details to the House.

[Mr Philip Hammond]

I am grateful to the right hon. Gentleman but I was not aware that I had not explained the situation publicly. If he would care to ask me a written parliamentary question, I will publish in the public domain the full information I have provided to him.

[Mr Murphy]

That is a kind offer from the Secretary of State, although he could have done so off his own back, and the problem is that we are running out of time for named day questions and replies. The alternative, with his permission, would be for me simply to tweet his letter. That would be quicker and I would be happy to do so if he so wishes. [Interruption.] With the Secretary of State’s permission, I will now tweet the letter I received some months ago detailing the Government’s response to The Sunday Times revelations.

These issues, alongside the impact of any reform of our strategic and working relationships with major international partners, particularly the US, and providing clarity on the ownership of risk, will be priorities for the Opposition. The restructuring of DE&S, however, should also be seen as part of a wider structural reform of defence procurement.

There is much else that I could have said, but time is against us today and my colleagues will raise in Committee additional points about sovereign capabilities, long-term planning and predictability for British industry, so I shall now turn briefly to reform of the reserves.

The Opposition want to ensure that reservist recruitment is successful so that the reserves can work alongside regulars to project force globally. Our reservists make an enormous contribution here at home in many ways. About 2,000 of them, some of whom I saw for myself when I went to see the Greco-Roman wrestling, helped to protect the London Olympics. Many serve overseas in far-away terrain in the name of national security. We should pay tribute to each one of those who have served, and above all to those who have lost their lives serving our nation.

While we champion the reserve force, we recognise the need to modernise. The name change to “Army Reserve” will reflect a modern composition and hopefully help to attract a new generation of recruits. The task ahead is, however, enormous and we should not pretend otherwise. The plan to double the size of the reserve forces to 30,000 by 2018 is now central to the Government’s ability to deliver their planning assumptions—originally, of course, designed for an Army of 95,000, but after further cuts now reliant on a regular force of just 82,000.

The scale of this task is underlined if we consider that the reserve forces of the US, Canada and Australia make up between 40% and 50% of their armies, as opposed to 20% here in the UK. Many analysts worry that, rather than reform of the Army being synchronised with that of the reserves, both are disjointed and the reserve uplift will not complement the regular Army but supplement lost capacity. Cuts in the regular Army are happening regardless of the success of any uplift in the reserves, rather than the one being contingent on the other.

This development comes as Army reserve recruitment has hit real trouble. The figures are publicly available—that recruitment targets were missed by more than 4,000 last year. Great care has to be taken to ensure that the loss of 26 Territorial Army centres does not make civilian communities in certain areas more disconnected from the military and disinclined to volunteer for the reserves.

[Mr Ellwood]

I echo the tone adopted by the shadow Secretary of State, but I am concerned by his direction of travel. Will he not take some responsibility for what happened to the TA during the previous Government’s tenure? The size of the TA fell by 40% and recruitment was down by tens of thousands. As a member of the TA, I remember an announcement from this place that training was to be cut and that no funding would be provided. He must acknowledge that the previous Government have some responsibility for where things are today.

[Mr Murphy]

That would be a very fair point if it was based on a fact. I suspect that our conversation today will be less productive if we repeat some of the debates of recent times, but the fact is that we increased the size of the Regular Army, whereas this uplift in the reserve forces is happening at a time of reductions in the Regular Army—that is the significant difference.

[Mr Ellwood]

I did not mention the Regular Army, but the TA. When Labour came to power in 1997, TA numbers were 62,000. When Labour left power in 2010, they were 37,000. It does not take a maths degree to realise that that is a massive reduction in TA capability.

[Mr Murphy]

My point is that in the same context, Regular Army numbers increased. I do not want us to bat each other about the head on this; I am assessing how we can make a success of the boost in reservist numbers. The comparison the hon. Gentleman invites me to draw, however, is with the Labour Government, and we boosted the size of the Regular Army. His party said that it was not big enough; it wanted an even bigger Army and was elected on a manifesto of going in that direction. The comparison is clear: we boosted the number of regulars. Of course, there is always pressure when it comes to reservists, who were under-recruited for about nine decades, so this is not a short-term problem for us or the current Government to grapple with.

[Mr Philip Hammond]

Will the right hon. Gentleman clarify two points? Does he accept that the six-month cancellation of TA training announced by the previous Government in October 2009 was not the way to stimulate TA recruitment and confidence? Also, as he is talking about Regular Army numbers, does he now accept a Regular Army of 82,000 as the basis for Future Force 2020, or does he still hanker after a reversal of that reduction?

[Mr Murphy]

As the Secretary of State knows, the previous decision on training was based on the recommendation of the Regular Army and the best available military advice. It was the type of situation that he faces whenever it comes to considering the best available military advice. We will make the detailed shape of the formation of our forces clear in our strategic defence review and in advance of the election.

The Opposition support moves to improve the training for reservists and ease their deeper integration with regular forces. We also support moves to use niche civilian skills, for example on cyber, in a military setting as well as to expand occupational health services. There are, however, areas where we believe the Government could go further. It is essential that the changes, particularly the extended periods of training and deployment, be compatible with employment patterns and that the reforms be designed in collaboration with employers.

It is worth noting the huge impact the changes could have on employers, particularly small employers. More than 600,000 businesses in the UK employ between two and four people. I suspect that we Members all employ a similar number of people in our parliamentary offices. We should ask how we would cope with losing a staff member for up to a year. Although I am sure that each and every one of us would be enormously supportive of a staff member’s military ambition, we might struggle to fill that space. Once we reflect on how we would feel about that, it gives us a better understanding of what many within that core group of 600,000 businesses will be confronted with.

Our view is that the reservists in those businesses will be a remarkable bonus and asset for them, but we must do more together to make that argument. A survey by the Federation of Small Businesses found that for one in three businesses, nothing would encourage them to employ a reservist, whereas almost 40% of those who had employed or would consider employing a reservist said that they believed that the Government’s proposed reforms would have a negative impact on their business. I do not agree with that; nevertheless, it is a sentiment felt by all too many businesses.

I welcome the announcement about access to unfair dismissal tribunals, but, as we have said before—and the Secretary of State referred to this—we believe that Ministers could go further. Current legislation clearly states that an employer has a duty to re-employ a returning reservist in the occupation in which he was employed before his service, on the same terms and conditions. There is, however, no legislation to prevent employers from discriminating against reservists in their hiring procedures on grounds of military affiliation.

We hope that, rather than embarking on a new consultation, the Government will work with employers on new legislation to provide further protection against discrimination in the hiring of reservists, which would need to be coupled with an obligation for reservists to make a transparent declaration at the interview stage. We believe that that should be part of a wider collaborative approach, and that a permanent employer engagement committee should be established to enable Governments to take the lead in advocating the employment of reservists.

There has been some debate about whether £1.8 billion is the right amount to invest, but we should also consider whether it will provide value for money. We hope that Ministers will be able to shed light on that in Committee. We shall want to know what proportion of the money is intended to fund financial incentives for employers and the “reservist award”, which tops up reservists’ salaries to match their civilian salaries. We shall also want to know whether the £1.8 billion covers reservists’ training, medical costs and pension payments, or whether those will come from another part of the MOD’s core budget. We are keen to establish what elements of the Reserves 2020 plan have clear funding streams, and where there may be unknown liabilities in a budget that involves competing interests.

The Bill has the potential to help the United Kingdom develop world-class procurement procedures that will be the envy of every nation. It gives us an opportunity to make a success of the enormous challenge of doubling the reserve force. The Opposition will support and scrutinise its proposals in Committee, and will give it a fair passage today.