Military Credit Union

Philip Dunne Excerpts

Tuesday 8th April 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

It is a great pleasure to serve under your chairmanship today, Mrs Riordan. For me, as for the hon. Member for Harrow West (Mr Thomas), this is the first opportunity to do so. I congratulate him on securing the debate. He has been a persistent advocate of an armed forces credit union—I think he presented a ten-minute rule Bill earlier in the year—and I am pleased that he has managed to secure a full 90-minute debate today. It is good to see colleagues from Northern Ireland supporting it.

There is no fundamental disagreement between us on the proposal. The Government have actively supported credit unions since we came to office and we have been working energetically to increase access to affordable credit by modernising and expanding the sector. That is why we are investing up to £38 million in the credit union expansion project, providing an increased range of financial services for up to 1 million more customers, which we anticipate will save them up to £1 billion in loan interest repayments over the period to March 2019. We also believe that credit unions have a role to play in supporting our armed services.

Financial pressures exist within service households just as they do in the wider community, as all those hon. Members who spoke explained. Indeed, many hon. Members may have received letters from members of the armed forces or their families who have been denied credit, have struggled with obtaining a mortgage or have been refused the opportunity to purchase a financial product as simple as a product warranty. Often that has nothing to do with their creditworthiness per se, but is due to the nature of a peripatetic career that can prevent some in the armed forces community from developing a consistent credit history in the area where they live; that is often used by credit referencing companies to determine credit credentials. We recognise that that is a problem within the structure of employment in the armed forces, and have been actively taking steps to ease the problems for service personnel, as an important component of the armed forces covenant, which the hon. Member for West Dunbartonshire (Gemma Doyle) mentioned.

Two years ago, in April 2012, working with credit reference agencies and the Royal Mail, we introduced “shadow” postcodes against British forces postal addresses, to try to establish consistency of address. That helps armed forces personnel serving overseas to maintain a UK credit history that is recognised by financial service providers and allows improved access to financial products. The MOD has also secured an important pledge from, among others, the UK Cards Association, the British Bankers Association, and the Council of Mortgage Lenders to treat

“applications for credit and mortgages...fairly and consistently with civilian counterparts”.

Last year, as other hon. Members have mentioned, we launched MoneyForce in partnership with the Royal British Legion and the Standard Life Charitable Trust. That has been providing training, briefings, resources and online support, helping the armed forces community to manage its money and financial affairs better.

Despite that support, there are still those in the forces, as there are among the public at large, who end up requiring a loan just to make ends meet. I am sure that the hon. Member for West Dunbartonshire was not suggesting, in her remarks, that armed forces personnel have increasingly become users of food banks, because I am aware of no evidence of that. If she has any I should be interested.

[Gemma Doyle]

indicated dissent.

[Mr Dunne]

I think she is indicating that she did not mean that, and I am pleased to hear that, because there is no reason for it.

Citizens Advice has said that it is dealing with a significant number of cases of service personnel and their families who get into difficulty with debts at high interest rates owed to payday lenders. Those lenders appear to be specifically targeting the armed forces because some personnel have problems with credit ratings. The hon. Members for Harrow West and for West Dunbartonshire both mentioned some of those payday lender adverts, and the extortionate rates of interest that they charge. I searched the internet to see what claims those companies make. Entering “armed forces loans” into the search engine generates a list of companies promising no credit checks, rapid payment and 100% satisfaction. One website even depicts a smiling soldier in uniform giving a thumbs-up in front of the Union flag, with the claim that it is the

“Number One lender to the military”.

[Mr Thomas]

The Minister accused me of persistence, so as he is five minutes into what is, to be fair, a very interesting speech, will he tell me whether he will support a feasibility study on payroll deduction, and meet me to discuss how we might get quicker access to credit union products for armed forces personnel?

[Mr Dunne]

I am sorry that the hon. Gentleman seems to want to bring the debate to a premature conclusion. We have plenty of time left, and I am sure, given that he called the debate, he would like to use as much of it as possible. He already asked that question in his remarks, and I hope to deal comprehensively with all his questions before the debate finishes.

I referred to the website because of the impression that may advertently or inadvertently be given that websites directed at the armed forces carry some endorsement from the armed forces. That could not be further from the truth, but it highlights the risks for the Ministry and the service branches in any involvement in the provision of financial products, should personnel or their families get the impression that the military was endorsing a particular product. Such a financial product would carry the same kinds of risk as any other regulated entity, and we take that seriously.

[Jim Shannon]

The hon. Member for Harrow West and I cited the Navy Federal credit union in the United States as an example of something that is clearly personnel-oriented but is acceptable and does what it should: it does what it says on the tin, as we say. That is an example of what could be done.

[Mr Dunne]

I completely accept that there are examples elsewhere, as the hon. Member for Harrow West said—not just in the United States but also in Australia—of credit unions receiving support from the armed forces. I shall come on to that but I was just highlighting the level of associated risk.

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On resuming—

[Mr Dunne]

Before the Division, I was explaining how credit unions must be properly regulated, and the fact that we need to be confident that any credit union established with military branding has some financial security. Credit unions offer access to good-value savings and loan products for a customer base that has historically found it hard to access such services. They are registered as industrial and provident societies and are regulated by both the Financial Conduct Authority and the Prudential Regulation Authority.

Unlike payday loan companies, credit unions are, in my view, a positive force for the community around them, benefiting members and local economies alike. Their role in developing alternative financial services for member groups has been well championed in this House, not only by the hon. Member for Harrow West but particularly by the all-party group on credit unions, which my hon. Friend the Member for East Hampshire (Damian Hinds) has chaired so admirably since he was elected, among his many other duties, including his support for me today, for which I am extremely grateful.

Of course, provided that they meet the common bond for membership, members of the armed forces and their families can already apply to join an existing credit union local to them in order to access the range of financial services on offer. However, coverage is not national and the services vary. As the hon. Member for Harrow West pointed out, the Navy Federal credit union in the US is a model of what can be achieved. It has around 5 million members and some £50 billion in assets. I agree with the hon. Gentleman that a well-managed credit union for our soldiers, sailors, airmen and women, as well as their families and veterans, could be of considerable benefit if established for United Kingdom armed forces.

However, there is a “but”. What makes credit unions unique and makes them work is their independent spirit. They are created by the people for the people, offering products that their customers want because their customers are also their members. Typically, credit unions grow steadily and organically from small beginnings, normally taking many years to cultivate their membership. To give one example, the Glasgow Credit Union was founded by two members in 1989 as the Glasgow District Employees Credit Union. In the following 25 years, it grew to a membership of 32,000 and now has some £100 million in assets. Although this is an excellent example of localism in action, it demonstrates the time that it can take a credit union to develop proper traction and critical mass. Also, it would not be in the interests of anyone—the taxpayer, UK financial services or credit union members themselves—to try to shoehorn an institution of this kind into a Whitehall Department. The organisation of credit unions has always been, and must continue to be, the remit of the private and voluntary sector. It is no small undertaking to establish one.

[Gemma Doyle]

Could the Minister explain, therefore, why the Department for Work and Pensions has put aside £38 million to support credit unions, because that does not seem to sit with the point he has just made, namely that supporting credit unions is not the business of Government?

[Mr Dunne]

The Government are keen to support the development of credit unions but we are not keen to be the operator. The funding is available to provide support. I am not familiar with all the detail about what the DWP funding has provided, but I can certainly look into that matter and write to the hon. Lady if she would like clarification. Nevertheless, as far as I am aware, it is not the business of the DWP to establish credit unions. I think that it is providing support for existing or start-up unions being established around the country on an initial basis, effectively like providing start-up funding for a business.

[Mr Thomas]

Of course the Minister is right that one would not want a military credit union to be run by the Secretary of State for Defence, or even by a talented junior Minister such as himself; one would want it to be run by its members. However, what the Ministry of Defence could do is help to facilitate the establishment of such a credit union and a feasibility study that was specifically focused on what role the MOD might play to help to achieve that objective.

[Mr Dunne]

Indeed, and not for the first time the hon. Gentleman is pre-empting just what I am coming to in my remarks; he is very prescient.

It is important that any organisation that undertakes the establishment of a credit union does so with its eyes wide open and is aware of the risks that might be involved. From our perspective, in the event that we were to provide support for an organisation, we have some responsibility for the savings of service personnel, to ensure that those savings are in an environment where they will be properly stewarded, managed and regulated. That said, we are minded to support any suitable organisation with the wherewithal to put in place a credit union to support the men and women who serve in our armed forces.

To that end, I will update the House on where the Department has got to in the discussions that were identified by the hon. Gentleman in his remarks. The Department has already brought together relevant parties to form a working group to look at precisely this issue. It includes the DWP, the Treasury and the Association of British Credit Unions Limited, as well as service charities such as the Royal British Legion and the three service benevolent funds. A number of those stakeholders were present at meetings hosted in January and February by the MOD. There was broad support for the credit union concept and a number of parties expressed their willingness to become involved, but unfortunately at that time none of the individual charities stepped forward to take the lead. Subsequent to those meetings, however, we have had further approaches from some of those organisations that attended them. ABCUL, which was referred to earlier, has been in touch and it has indicated that it is keen to take these discussions forward. We, too, stand absolutely ready to do so.

The hon. Gentleman has asked repeatedly about the prospect of the MOD funding a feasibility study into a military credit union. We are of a mind to support one or more organisations that wish to take the lead in investigating the feasibility of a credit union, but we do not think that it would be appropriate for us to take the lead. As and when an organisation steps forward, we are willing to work with it on how we can best support the establishment of a credit union, but we think that actually establishing a credit union would be best done by an organisation that is already one of those we have been talking to and that is already embedded with relationships with service personnel and their families.

[Mr Thomas]

I want to understand exactly the Minister’s point. If a charity or a credit union were to come forward saying that it believes it has the capacity or interest to provide such a dedicated military credit union and to get it up and running, would there potentially be the prospect of support in financial terms as well as in the crucial area of payroll deduction for a military credit union?

[Mr Dunne]

I am not in a position to commit the Ministry’s budget here and now. What I am willing to do, as I think I have already indicated, is to offer further support to explore the possibility of establishing a military credit union. If an existing credit union felt that it had the resources and the experience to bring to bear, that would be a very positive development; equally, if an existing service charity felt that this was an area that it wished to explore, that would also be very welcome. I am not closing the door to providing assistance for a feasibility study, but I will not commit at this point to conduct one without knowing to whom I might be making such a commitment.

[Jim Shannon]

Further to the point made by the hon. Member for Harrow West, I have a question. My hon. Friend the Member for North Antrim and I suggested that, by making payroll deductions during a five or 10-year period, we could build in the moneys that would be needed, while being ever mindful that it is a credit union that is being established. Would such a scheme be part of the feasibility study?

[Mr Dunne]

The subject of payroll deduction has been raised by a number of hon. Members. We make payroll deductions in certain areas. Insurance services were specifically mentioned as possible services for a credit union to provide and it was said that a payroll deduction might be a way of helping to fund insurance premiums. We already make such deductions for armed forces personnel. We have a payroll deduction scheme that is financially supported by the Government, over and above our merely facilitating contribution payments. That is to ensure that life insurance is available to armed forces personnel who are on operations, irrespective of their role. That is a specific product that is funded through payroll deduction.

[Mr Thomas]

I am grateful to the Minister for what he just said on that subject. However, may I specifically ask him whether the MOD now accepts that if there were a credit union that it had confidence in regarding the ability to provide financial services to armed forces personnel, it would be willing to facilitate payroll deduction for members of the armed forces to join, contribute to and pay into such a specific military credit union?

[Mr Dunne]

Again, we are talking about quite a number of hypothetical steps here. I am certainly willing to say that if we get into discussions with a serious, credible entity that is willing to establish a credit union, we can consider the possibility of payroll deductions as one means of providing either interest payments or investment through the union’s savings products. However, in the absence of knowing which party we would be dealing with and the suitable structures that would be placed around it, I cannot commit to do that.

The hon. Gentleman will appreciate that military payrolls are not a uniform or simple thing. The issue strays rather beyond my departmental responsibilities, so for me to commit other Ministers and other elements of the Department to things about which I am not expert would be career-inhibiting. I will not do that, but I certainly undertake that, if we pursue discussions with the credit union, the issue can be on the agenda.

[Mr Thomas]

I would not want to limit the Minister’s career in any way, given how helpful he has been in this debate. On payroll deduction, I gently suggest to him that the NHS has some equally complex systems, and many parts of the NHS are able to do it. My last specific question is whether he is willing to commit to asking the relevant Minister—I appreciate that he is filling in today—to meet ABCUL, Plane Saver and me. Those organisations think they might be in a position to offer a credit union service now, before a dedicated military credit union is established.

[Mr Dunne]

The hon. Gentleman referred to Plane Saver before, and I am not aware that it has directly approached us. We have clearly had an approach from ABCUL. It participated in meetings earlier this year and wrote again last week, perhaps prompted by sight of this debate. I am confident that the Under-Secretary of State for Defence, my hon. Friend the Member for Broxtowe (Anna Soubry), who has responsibility for defence personnel, welfare and veterans, would be willing to meet the hon. Gentleman and ABCUL. If he wanted to bring Plane Saver along, it would be welcome, too.

The hon. Gentleman asked some specific questions about the promotion of credit unions within military publications. Were the credit union to be established with support from the military, it would be more than welcome to take space in the military publications. I cannot, however, commit to the charging basis on which that space would be available; that would be a matter for the normal procedures for each publication. He asked whether we could institute a ban on payday lenders advertising in military publications. This Government are not in the business of prohibiting freedom of speech. Payday lenders might be unethical, but they are not unlawful, so we should not ban their adverts. We should, however, look to support the credit union going forward.

The hon. Member for Strangford (Jim Shannon) asked whether we could underwrite a scheme, but I have to disappoint him. The Ministry of Defence budget might appear to be large, but it appears from the inside to be somewhat constrained. We have to devote our budget to our front-line duty, which is protecting the nation. We are willing to provide opportunities to access military publications and that kind of thing, but we are not in a position to underwrite a financial offering to our personnel.

[Jim Shannon]

I also asked the Minister about giving advice to soldiers and serving personnel on how best to manage their money. I said that, often, those who did not have the level of income they currently have found managing their money overawing. Has offering that advice been considered?

[Mr Dunne]

Indeed. The hon. Gentleman raised the role of the Money Advice Service, which we established two years ago, and I am grateful that he gave it a positive endorsement. The advice is proving effective and, as the hon. Member for West Dunbartonshire said, the number of people taking advantage of the service in its first two years demonstrates that there was a need for it. We think that it is being delivered in the right way. I also thank the hon. Member for Strangford for the advert he gave to Armed Forces day this summer and the celebrations that will take place in his constituency. I wish them well.[Official Report, 28 April 2014, Vol. 579, c. 7MC.]

I conclude by confirming that the Government support the notion of establishing a military credit union. We are in active discussions with the credit union trade body and the service charities. I have indicated that we are willing to commit the Minister to meet them again, with the hon. Member for Harrow West, who takes such an interest in this matter. In closing, I encourage all parties with an interest in developing this kind of financial service for our armed forces personnel to get together, to pool resources and to try to find a way of making it happen.

Defence Support Group

Philip Dunne Excerpts

Monday 31st March 2014 Written Statements

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

The strategic defence and security review 2010 set out this Government’s commitment to selling the Defence Support Group (DSG), currently a trading fund of the Ministry of Defence (MOD). This decision took account of the front line’s enduring requirement for DSG’s services, and concluded that, in principle, it was no longer necessary for Government to own and operate these capabilities. Contractor support to maintain equipment, including major platforms, has been recognised practice in the air and maritime domains for many years, so continued support to the land domain by DSG under new ownership is entirely analogous. There is significant potential for the land-focused elements of DSG in the private sector. We intend to structure the sale in such a way as to preserve continuing assured access to the services provided by DSG through a contract for service provision.

Over recent months, the MOD has conducted a pre-qualification process with industry and developed the prospectus on which DSG will be taken to market. As part of these preparations, including market testing and internal assessment, I have decided that the electronics and components business unit (ECBU) of DSG, and its sites at Sealand and Stafford, will be excluded from the sale and retained in the MOD. I have now taken the decision to launch the sale of the land-focused business of DSG.

An invitation to negotiate has now been issued to nine potential single bidders and consortia who passed the pre-qualification stage. The nine parties represent a very strong and credible field of interested parties, demonstrating the high degree of market interest from the private sector and confidence in the DSG sale.

The DSG work force and trade unions are being informed in parallel. The final sale decision will be taken later in the year after final bids have been received and evaluated.

Sustaining the capabilities provided by DSG remains of critical importance to the Ministry of Defence and the British Army. Selling the land business of DSG will be the best way to enable transformation into the long-term partner for the delivery of heavy vehicle repair services to the Army that we now require.

Oral Answers to Questions

Philip Dunne Excerpts

Monday 17th March 2014 Commons Chamber

[Jesse Norman (Hereford and South Herefordshire) (Con)]

1. What steps he is taking to support small contractors in military procurement.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

I recognise that small businesses are an important source of innovation and flexibility in meeting defence and security requirements. I am determined to help small and medium-sized enterprises access defence opportunities, including standardising and simplifying our procurement systems, so from this month we are minimising the use of pre-qualification questionnaires and increasing use of standard contract templates for low-risk requirements of under £100,000.

We are regularly making progress on these and other SME initiatives, but we also need to inform the SME community that it is getting easier to do business with the Ministry of Defence, which is why we publish the SME action plan on the gov.uk website and why I am undertaking a series of regional visits to talk to SMEs, such as the excellent event that my hon. Friend hosted in Hereford on 6 December 2013.

[Jesse Norman]

I very much thank my hon. Friend for that reply and for the extremely encouraging news that he has described. There are a large number of specialist defence suppliers in my constituency in Herefordshire. They provide vital new technologies and training for the troops, but they often face huge and apparently unnecessary mark-ups and delays forced on them by the requirement to be part of prime contracts. What can the MOD do to help these companies compete more fairly?

[Mr Dunne]

I agree with my hon. Friend that SMEs have an important role to play across defence procurement, but in particular in new technologies and in training. That is why the Government are committed to increasing the proportion of our annual spend on SMEs. Last year that rose to 15% by value of all spend, with some £1 billion spent directly and £2 billion spent indirectly through larger prime contractors, but the proportion of new contracts is even greater with over a third of all new contracts placed with SMEs in each of the last three years.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Devolved Administrations and their arm’s length agencies often have very close relationships with their SME community. What discussions is the Ministry of Defence having with the devolved Administrations to make sure defence contractors based outside England also have an opportunity to bid?

[Mr Dunne]

Of course defence, and therefore defence procurement, is not a devolved matter and therefore the work the Ministry of Defence does is primarily with industries right across the country. I have undertaken events in Scotland and I am looking forward to an event in Wales in due course later this year.

[Angus Robertson (Moray) (SNP)]

May I wish you a very happy St Patrick’s day, Mr Speaker, and no doubt MOD Ministers will be pleased to put on record their appreciation for the increasing co-operation with the Irish defence forces?

In a parliamentary answer on 3 October 2011 the MOD admitted that out of 6,000 SME contracts with the MOD, only 50 contracts were in Scotland, which is 0.83%, just under 10 times less than Scotland’s population share. When will the MOD answer my question on SME spending across the UK by region, which was tabled in January?

[Mr Dunne]

As I have said to the hon. Gentleman previously, we do not believe it is relevant to look at the location of where we procure equipment. We want to procure the best equipment for our armed forces from the best place. Scotland of course has a significant share of much of our spending, not least through the aircraft carrier contracts, which I saw for myself last week, and much of that defence work would be at risk were Scotland to vote yes in the referendum in September.

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

2. What discussions he has had with the Chancellor of the Exchequer on staff pay and conditions in the new DE&S model.

--- Later in debate ---

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

8. What recent assessment he has made of the economic effects on west Fife of the Queen Elizabeth class carrier programme.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

The carrier programme as a whole is estimated to have sustained about 10,000 jobs across the UK, 4,000 of which are based in Scotland. Although we have made no specific assessment of the impact on the hon. Gentleman’s constituency, to the end of January the Ministry of Defence had spent about £2.3 billion on work billed to the programme by BAE Systems on the Clyde, and by Babcock at Rosyth. I was pleased to visit Rosyth last week to see the progress of the work on the Queen Elizabeth carrier, which is on track to be flooded up in July. The initial bow sections of the Prince of Wales carrier are dockside, ready for assembly to start later this year.

[Thomas Docherty]

I am grateful for that answer. Is the Minister aware that Babcock commented last week that if Scotland votes yes it would be highly unlikely that my constituency dockyard would get further orders for maintenance work from the MOD? Is that why the Scottish National party has admitted that there would be significant job losses at Rosyth in the event of independence?

[Mr Dunne]

The hon. Gentleman will not be surprised to learn that I keep an eye on press cuttings relating to all defence procurement matters. The in-service support solution for the Queen Elizabeth class carriers is still in development and will not be decided until next year, but much support will be delivered at the base port and on deployment at sea. I think, however, that the hon. Gentleman was referring to depth maintenance and refit, and the security implications of that work being undertaken in a non-sovereign dock outside the UK would need to be carefully considered. Several dry docks in the UK are physically capable of accommodating such ships outside Scotland.

[Jason McCartney (Colne Valley) (Con)]

10. What discussions he has had with his counterparts in NATO member states in preparation for the NATO summit in September 2014.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

We are in negotiations with BAE Systems for the contract to build the three new offshore patrol vessels announced in November. As part of these arrangements, only last Wednesday, during a visit to Scotstoun, I announced that the MOD had committed £20 million to this programme, with the award of a contract for long-lead items, such as engines and gearboxes, which need to be ordered in advance. The main investment decision is due in coming months and construction work of the vessels is due to begin this autumn.

[Oliver Colvile]

Will my hon. Friend also set out the timetable for the building of these frigates and ships, and say a little about when the base porting announcement might be made?

[Mr Dunne]

I thought that my hon. Friend might be interested in the base porting announcement. As is normal practice, we will make the announcement around the time of the main gate investment decision, which, as I have already said, is likely to be this autumn. I am sure that he will advocate strongly his constituency interest, but I have to advise him that other hon. Members will be doing so as well.

[Sir Edward Leigh (Gainsborough) (Con)]

13. What effect the Army 2020 review has had on the operational capability of the armed forces.

--- Later in debate ---

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

T7. Last week, the Under-Secretary of State for Defence, the hon. Member for Ludlow (Mr Dunne), admitted that he had wasted £50 million on the Cipher cyber-security project. This weekend, we heard that the NATO website and other websites came under attack following the recent actions in Ukraine. Will the Minister give us a timely assessment of the UK’s and NATO’s cyber readiness, particularly with regard to the situation in Ukraine?

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

The Cipher contract cost the MOD £46 million. Work under the contract ceased in June of last year at the end of a protracted assessment phase, which concluded that the project would not meet the full defence capability requirement at value for money for the taxpayer. I remind the hon. Lady that the contract was placed in November 2008. It is a classic example of the legacy of out-of-control procurement contracts that we were left when we took office in May 2010.

[Mr Crispin Blunt (Reigate) (Con)]

T5. To pick up the theme from the hon. Member for Huddersfield (Mr Sheerman), between 1935 and 1939, defence expenditure doubled in response to the deteriorating security situation in Europe. Does the Department do any contingency planning to determine how our defence capability could be improved rapidly if there was a greater call on our nation’s defence resources?

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[Steve McCabe (Birmingham, Selly Oak) (Lab)]

As the Secretary of State says, procurement times are long. Joint Helicopter Command has indicated that it requires a new fleet of Apache AH-64E attack helicopters for operational use by 2020. Has that contract been signed yet?

[Mr Dunne]

If the hon. Gentleman is familiar with the AgustaWestland contracts, he will be aware that last month the Secretary of State announced a contract for the sustainment of the existing Apache fleet for the next five years. Thereafter, we are looking to introduce a contract that will take the effective use of the helicopter up to 2040. Discussions on how we should go about procuring that sustainment upgrade are under way.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

T9. In Budget week, will the Defence Secretary join me in commending Britain’s improved economic outlook, thanks to the Chancellor’s stewardship, which potentially gives rise to finding the annual £65 million required to run the second aircraft carrier? Does my right hon. Friend agree that operating two carriers would strategically extend and involve Britain’s diplomatic military influence in a manner not seen for a generation?

International Military Sales Ltd

Philip Dunne Excerpts

Tuesday 11th March 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

It is a pleasure, Ms Dorries, to serve under your chairmanship at this later than anticipated hour; I am grateful to you for keeping Westminster Hall open. I thank my hon. Friend the Member for Wyre and Preston North (Mr Wallace) for securing this debate. It is important that we have this opportunity to put on the record the Government’s position on the subject that he has raised today.

I know that my hon. Friend, who is chairman of the all-party group on Iran, has taken a keen interest in this matter since he joined the House. It is entirely appropriate that he should have secured this debate . He has raised the issue of a dispute, and it is important to try to get a little clarity on the record as to the nature of that dispute. It relates to a number of contracts—not to a single contract—between the Iranian Ministry of Defence, which I shall refer to as MODSAF, and International Military Services Ltd, known as IMS. I am pleased to have this opportunity to outline the Government’s position regarding the dispute. As my hon. Friend has acknowledged, I am, of course, somewhat limited in what I can say, given pending litigation in the High Court between IMS and MODSAF. The UK Ministry of Defence itself is not a party to those proceedings.

I will make a number of key points in responding to this debate. First, I wish to make it clear that the Government would like the matter to be resolved as soon as practicably possible, which I think was the main challenge laid down by my hon. Friend. We share his determination in that respect, not least because, as he said, the dispute can be traced back to 1979 and the demise of the Shah’s regime in Iran. At that time, IMS, a company wholly owned by the MOD, had approximately 60 contracts to supply MODSAF with defence equipment and services. The change in regime in Iran saw the cancellation and termination of those contracts, resulting in a number of legal disputes.

The vast majority of the disputed contracts were settled on 22 October 1990, but four contracts were not. The two largest of those four contracts involved, as my hon. Friend said, the sale of more than 1,000 main battle tanks and armoured recovery vehicles. These contracts were referred to the International Chamber of Commerce for arbitration. The ICC ruled on 2 May 2001—more than 10 years later—in favour of MODSAF. By agreement between the parties, MODSAF agreed not to pursue payment of the awards until the outcome of a planned challenge to the awards by IMS. That was under the proviso that IMS paid, by way of security, a sum sufficient to meet the awards into the High Court. That payment was made in December 2002.

IMS subsequently challenged the ICC awards through the Dutch legal system, as the seat of the ICC arbitration, culminating in a final ruling on 24 April 2009 by the Dutch Supreme Court. The challenge by IMS was partially successful, in that the Dutch Supreme Court partially set the ICC awards aside.

The Government and IMS accept the ruling of the Dutch Supreme Court. However, there are legal issues that remain unresolved as to the precise amounts payable to MODSAF and crucially, as my hon. Friend said, as to how the sanctions regime that had been subsequently imposed impacts on the awards and the circumstances under which MODSAF is entitled to receive payment. These issues are subject to litigation, with a High Court hearing scheduled for June.

In addition, as I have already mentioned, there are other contracts under dispute. In relation to one of these, an infrastructure contract, the ICC tribunal ruled in favour of IMS on 28 January 2005. Prior to the Dutch Supreme Court ruling in 2009, international sanctions were imposed against the Iranian Government, in the context of their potential nuclear aspirations. In 2008, MODSAF itself was designated under the relevant sanctions regulations. Notwithstanding the recent sanctions relief included in the joint plan of action agreed with Iran, the bulk of the sanctions remain in place until a comprehensive settlement is reached on the nuclear programme. It would be inappropriate for the Government to comment any further on these issues, given the pending litigation.

However, the Government would like to see a final and appropriate resolution of these long-running disputes, and we hope that the recent progress in reaching an understanding on a variety of issues with the Iranian Government will facilitate that objective.

[Mr Wallace]

I am not referring specifically to this case. In general, given previous rulings, does the Minister not recognise that it is perfectly acceptable for a court to deal with the discharge of an obligation separately from how that obligation is then paid to an entity? They are not the same things.

[Mr Dunne]

My hon. Friend pre-empts the conclusions to my remarks, but I can confirm that we anticipate a resolution being possible, ideally without recourse to the High Court action in June. We would be happy to see the parties engage to reach a settlement on the outstanding issues before it gets to court. We think that can be done irrespective of the sanctions regime. Once a settlement has been reached to agree a final amount, the payment of that amount becomes a matter for the prevailing sanctions regime in place at that time. I agree that those are separate issues, but the ultimate payment cannot be made while the sanctions regime is in place.

I want to mention a couple of other factors that the House needs to be aware of. All the negotiations that have taken place on this matter have been conducted by employees of IMS on a confidential basis, in turn routinely channelled through legal representatives. Also, given the title of this debate, I should like to clarify the relationship between the Ministry of Defence and IMS. IMS is a wholly owned subsidiary of the Ministry of Defence; all but one of its 20 million shares are held by the Secretary of State for Defence and the other single share is held by the Treasury Solicitor. It is governed by the Companies Act, with accounts filed in Companies House. The company formally ceased trading in 2010 and now exists purely to resolve the disputes that I have already touched on.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

rose—

[Nadine Dorries (in the Chair)]

I am sorry, Ms Seabeck, but because you were not here at the beginning of the debate, it is not in order for you to intervene. [Interruption.]

[Mr Dunne]

I should have been happy to take the intervention. If the hon. Lady has a point, perhaps she can make it to me afterwards.

[Nadine Dorries (in the Chair)]

May I clarify that Ms Seabeck is not allowed to intervene in this half-hour debate because she is the Opposition spokesperson?

[Mr Dunne]

Thank you, Ms Dorries. We all learn something new every day.

IMS employs two part-time staff members and three directors. The position of the Ministry of Defence and the Treasury is that the company should be wound up once the final disputes have been settled. I think that that addresses a number of points raised by my hon. Friend.

My hon. Friend mentioned the incident that took place in January last year, in which three Iranian officials were detained and deported from Heathrow airport. The former Under-Secretary of State for Foreign and Commonwealth Affairs, my right hon. Friend the Member for North East Bedfordshire (Alistair Burt), wrote at the time to the UK legal representatives of those concerned, explaining that although it was not the intention of the Government to cause undue anxiety, since the attack on our embassy in Tehran in 2011, Iranian officials had not been allowed to visit the UK in their official capacity. The Government regret any distress caused to those involved. Following the softening of the sanctions regime, we think it would now be possible for Iranian officials to engage with IMS, either on neutral territory or, indeed, here again in the UK, if they were willing to return.

To sum up, the Government and IMS recognise and accept the rulings of the Dutch Supreme Court in this matter. A number of issues remain unresolved and are subject to potential litigation, but we hope that a final settlement can be agreed soon. The parties are not very far apart in financial terms, and we hope that they can come to a resolution without further recourse to the courts. I hope that I have explained the Government’s position on this matter.

Question put and agreed to.

Submarine Dismantling Project

Philip Dunne Excerpts

Thursday 13th February 2014 Written Statements

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

I am announcing today that the Ministry of Defence’s submarine dismantling project (SDP) has published the provisional shortlist of candidate sites for the storage of intermediate level radioactive waste removed from nuclear-powered submarines after they have left naval service and been defuelled. The storage will be for an interim period until the UK’s geological deposit facility is available some time after 2040.

I previously announced on 22 March 2013, Official Report, column 61WS that all nuclear licensed and authorised sites in the UK, including those owned by the MOD, the Nuclear Decommissioning Authority (NDA) and industry, would be considered on an equal basis. This approach was based on the findings from an initial public consultation, which ran from October 2011 to February 2012, and was announced by the then Minister for Defence Equipment, Support and Technology my hon. Friend the Member for Mid Worcestershire (Sir Peter Luff) on 27 October 2011, Official Report, column 16WS.

All such sites have now been considered and the five that have been provisionally shortlisted for the interim store are as follows:

the atomic weapons establishment sites at Aldermaston and Burghfield in Berkshire, which are owned by the MOD and run by AWE plc;

Sellafield in Cumbria and Chapelcross in Dumfriesshire, which are owned by the NDA; and

Capenhurst in Cheshire, which is run by Capenhurst Nuclear Services.

In line with good practice on public consultation, we will now enter a period of pre-engagement with local authorities, elected representatives and established site stakeholder groups at each of the candidate sites. This will provide these groups with an early opportunity to understand and comment on the criteria that should be considered during the main assessment of shortlisted sites. It will also help us to shape the formal public consultation that we will carry out before any decisions are made.

Following this period of pre-engagement, our aim is to publish the final shortlist of sites in summer 2014. These will then be taken forward as the basis for public consultation, which will be carried out locally, around each candidate site, and nationally. Our plan is for the public consultation to begin towards the end of this year and end early next year.

Further information on the SDP and a copy of the proposed criteria and screening report, which contains more detail about why individual sites were chosen for the provisional shortlist, can be found at: https://www.gov.uk/government/publications/submarine-dismantling-project-interim-storage-of-intermediate-level-radioactive-waste.

Copies of these reports will also be placed in the Library of the House.

Oral Answers to Questions

Philip Dunne Excerpts

Monday 3rd February 2014 Commons Chamber

[Caroline Dinenage (Gosport) (Con)]

4. What steps he is taking to ensure that suppliers to his Department receive prompt payment.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

We are encouraging our suppliers to accept payment through our new electronic bill paying system, and I am proud to confirm to my hon. Friend that the Ministry of Defence paid 92% of correctly submitted invoices within five working days in the last financial year. We have identified that the majority of the less than 1% of late payments made by the MOD were a result of incorrectly submitted invoices, such as those submitted on order rather than after product delivery. All correctly submitted invoices were paid within 30 days in 2012-13.

[Caroline Dinenage]

Prompt payments are particularly crucial for small businesses that can face severe cash-flow problems without them. Will the Minister assure the House that he is doing all he can to ensure that small businesses are paid on time?

[Mr Dunne]

This Department, under this Government, is well aware of the benefits of prompt payment and the importance of cash flow to SMEs. That is why not only are we paying our suppliers on time, we are also encouraging them to pay their subcontractors within 30 days of receipt of a valid invoice.

When this issue was raised in November I inadvertently misled the House and I would like to put the record straight. I informed the House that the Ministry of Defence had incurred a single late-payment penalty on only one invoice out of some 4 million. It has now come to my attention that in fact we paid almost 5 million invoices last year—a penalty payment rate of 0.00002%.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

It would be churlish of Labour Members not to acknowledge the good work that MOD officials in particular have been doing, not least because they are protecting a supply chain that often produces extremely specialist products. What discussions is the Minister having with small and medium-sized businesses that may be affected by the reported 20% efficiency savings sought in the support contracts about the way that prime contractors may pass that 20% down the line to protect their own losses? Getting paid on time is one thing, but losing one’s business is another.

[Mr Dunne]

I am glad the hon. Lady asked me to comment on that. We are engaged across the supply chain in seeking to extract maximum efficiencies for the taxpayer from MOD procurement. I am engaged in SME conferences with the defence industry right across the country. Indeed, I intend to come to Plymouth in the not-too-distant future, and the hon. Lady may like to join me.

[Roger Williams (Brecon and Radnorshire) (LD)]

5. What his future plans are for the defence estate in Wales; and if he will make a statement.

--- Later in debate ---

[Jason McCartney (Colne Valley) (Con)]

T3. With one of my local engineering businesses having been awarded the design contract for the Type 26 global combat ship, please can my right hon. Friend update me on the progress of this project?

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

I thank my hon. Friend for giving me this opportunity to confirm that the current contest for the design for the Type 26 has been won by BAE Systems but it is in its assessment phase and all contracts that have been placed thus far are to enable BAE Systems as prime contractor to refine its pricing so that when the entire design is mature we will be able to place a main-gate contract, which we hope to be able to do by the end of this year.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

T9. Will the Minister update the House on what progress the Department is making in incorporating UN Security Council resolution 1325 on women, peace and security into the training and education of our armed forces?

[Duncan Hames (Chippenham) (LD)]

T5. Employees of Defence Equipment and Support who are resident in the Chippenham constituency are watching closely to see what the latest reforms of that organisation will mean for them. Will the Minister give them his assurance that those organisational changes will not put their jobs at risk?

[Mr Dunne]

Our proposal to stand up the DE&S as a bespoke trading entity with effect from 1 April are proceeding apace, and I can tell the hon. Gentleman that there are currently some 800 vacancies among the 9,500 posts in DE&S involved in defence acquisition, as my right hon. Friend the Secretary of State told the Defence Select Committee the other day. The prospects for skilled employees in the hon. Gentleman’s constituency and adjacent constituencies are therefore extremely good.

[Mr William Bain (Glasgow North East) (Lab)]

Does the Secretary of State welcome the terms of the agreement reached in Brussels last month on greater European defence co-operation, including completing the single market in the sale of military equipment? What does he think would happen to jobs in our defence manufacturing industries if Britain were to sleepwalk out of the European Union—a proposition that he has agreed with in the past?

--- Later in debate ---

[Julie Hilling (Bolton West) (Lab)]

While the Government are making cuts to the armed forces, how can they justify spending £66 million on consultants? Is it true that much of that £66 million was spent on the Secretary of State’s failed GoCo procurement? Will he be asking for the money back?

[Mr Dunne]

I am interested that the hon. Lady has given us an opportunity to highlight the amount of money that was spent on external consultants under the previous Administration. While this Government have undertaken transformational change in this Parliament and spent £45 million last year on external specialist advice, the previous Government did no transformation in defence and spent £120 million in 2007-08.

[Dr Julian Lewis (New Forest East) (Con)]

May we acclaim the fact that Members of both the Conservative and Labour Front Benches are vying to show which party is the more committed to the successor Trident nuclear system? Is the Secretary of State aware that an analyst at the normally sensible Royal United Services Institute defence think-tank has suggested that even an inactive fleet of submarines can help deter actors from seriously threatening the UK? Does he agree that to adopt such a dangerously destabilising posture would not even save any significant money at all?

--- Later in debate ---

[Alex Cunningham (Stockton North) (Lab)]

How many staff at Defence Equipment and Support have been made redundant and received pay-offs only to be re-employed on a consultancy basis a very short time later? How will that affect the new pay structures that the Secretary of State is planning to adopt there?

[Mr Dunne]

Close to 2,000 people from DE&S took voluntary redundancy under two tranches in 2012. There are a number of vacancies, as I have already said to the hon. Gentleman. A total of seven individuals have been rehired into DE&S who subsequently applied either for lower grade posts or who have upskilled in the meantime.

[Several hon. Members]

rose—

Oral Answers to Questions

Philip Dunne Excerpts

Monday 16th December 2013 Commons Chamber

[Laura Sandys (South Thanet) (Con)]

1. What recent assessment he has made of the security of the UK’s international supply chains.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

The Ministry of Defence undertakes a quarterly assessment of industrial risk covering both domestic and international supply chains. Our key suppliers are under regular review, not only for their financial status, but for their business strategy, sector risk and leverage. Prime contractors are held responsible for the health of their own supply chain, although many of their sub-contractors are also reviewed under the MOD critical supplier process, which monitors the financial resilience of more than 500 domestic and international suppliers.

[Laura Sandys]

Food security is one of the big issues facing the UK, given that we are one of the largest importers of food. When assessing the increasing protectionism and food consumption globally, does the MOD feel that we have a secure food supply chain?

[Mr Dunne]

I am very confident of the food supply chain for mince pies, having visited the factory supplying our troops in Helmand earlier today.

The national security risk assessment rates the short to medium-term disruption to essential resources including food as a tier 3 risk. The UK currently enjoys a high degree of food security in terms of access, availability, resilience and variety of food supply. The main role for the MOD in securing international food supply chains and other critical resources is, in co-ordination with others, to police international sea lanes, which supply the vast majority of imports to the UK of food and other essential resources.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

In the scenario planning assessing the security of the supply chain, has the Minister considered the possibility of the Suez canal being closed? What provision has he made for such a scenario?

[Mr Dunne]

The Suez canal is clearly a vital supply chain route in and out of the Mediterranean. Naval vessels use those channels to take part in some of our regular routine operations on the other side of the Gulf, and the canal is of course an essential part of the security of supply chains for oil resources out of the Gulf. We keep that under continual contingency planning.

[Caroline Dinenage (Gosport) (Con)]

BAE Systems has announced its plan to cease shipbuilding in Portsmouth, which will have an impact not only on its own employees but on those in the wider supply chain. What steps is the Minister taking to support small and medium-sized enterprises through this difficult time?

[Mr Dunne]

Clearly, BAE System’s decision to extract itself from shipbuilding in Portsmouth will have a significant impact locally, but my hon. Friend will be well aware that more than 11,000 people will continue to be employed on the royal naval base at Portsmouth, which will maintain vital jobs for SMEs throughout the supply chain.

[Andrew Gwynne (Denton and Reddish) (Lab)]

What role can unmanned aerial vehicles play in filling the maritime capability gap, and has the Minister considered the use of UAVs by both Europe and the United States of America for maritime surveillance and intelligence, surveillance, target acquisition and reconnaissance?

[Mr Dunne]

The hon. Gentleman will be aware that the strategic defence and security review 2015 will be the opportunity to review new capabilities in the unmanned space. He might also be aware that the ScanEagle unmanned maritime system is due to enter service in the new year.

[Yvonne Fovargue (Makerfield) (Lab)]

Cyber-security attacks constitute an increased threat to the supply chain. How is the MOD working with the industry to ensure sufficient and proportionate cyber-security in the UK supply chain?

[Mr Dunne]

As the hon. Lady might be aware, last July we announced the defence cyber-protection policy, which works in conjunction with industry to develop awareness of cyber-defences across the 13 largest defence contractors and with the SME representatives, the trade associations. We are working closely with industry to develop cyber-defensive capabilities.

[Mr Philip Hollobone (Kettering) (Con)]

2. How much humanitarian assistance has been provided by his Department to (a) the Philippines and (b) other parts of the world in 2013; and how much funding for such assistance has been reimbursed to his Department to date.

--- Later in debate ---

[John Howell (Henley) (Con)]

6. What recent investment his Department has made in the armed forces’ helicopter capabilities.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

This Government are committed to providing our armed forces with the helicopter capability required for Future Force 2020. In the equipment plan, published last January, we confirmed that the Department would spend some £12 billion over the next 10 years to ensure that our helicopter capability remained up to date. We have already invested £2 billion since the strategic defence and security review in 2010 on modernising our existing helicopter fleet and bringing into service the Merlin Mk 2, the Wildcat and—a matter of particular interest to my hon. Friend—the Pumas based at RAF Benson in his constituency.

[John Howell]

I thank my hon. Friend for that answer. Will he ensure that the 14 Chinook helicopters ordered by this Government will be put to good use, unlike the eight Chinook helicopters that were left languishing in hangars under the previous Government, despite the shortage of lift capability?

[Mr Dunne]

My hon. Friend is quite right. This Government are getting helicopter capability upgraded and in service, in stark contrast to the Labour Government, who left eight Chinook helicopters languishing in hangars for years.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

I draw the House’s attention to my entry in the register.

We know that the UK has strength and depth across helicopter design and development—I have visited AgustaWestland and spoken to other manufacturers—but we need support for the future development of both rotary and fixed wing. In the light of recent reports that the next generation of fighter aircraft may have to be bought specifically from the US or Asia, what steps is the Minister taking to ensure that we not only protect the skills in the UK but meet our future defence needs?

[Mr Dunne]

I am intrigued that the hon. Lady is seeking to divert the question to fixed wing from rotary wing. We have a clear strategy to replace fixed-wing and helicopter capability over the next period. On the joint strike fighter, a 15% share of that global programme is being manufactured here in the UK through the BAE Systems and Rolls-Royce supply chains.

[Alun Cairns (Vale of Glamorgan) (Con)]

7. What reports he has received on the use of the runway at MOD St Athan by private companies based in the nearby enterprise zone; and if he will make a statement.

--- Later in debate ---

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

9. What recent discussions he has had with the UK defence sector on the protection of intellectual property.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

Routine contract negotiations involve intellectual property discussions with industry all the time. The MOD’s intellectual property team enjoys a close working relationship with industry. A joint issues working group meets three times a year and it includes the industry trade body ADS.

[Mr Sheerman]

The Minister will know that I chair the all-party group on manufacturing and that we have some fine manufacturers in my constituency. There is a worry in the sector about the close relationship with China. We want to export to China, but many people in the sector believe that China is in the business of economic warfare—it has stolen our IP—and that we are opening up our major sensitive companies to the stealing of IP by China.

[Mr Dunne]

The hon. Gentleman may have a point in relation to other industries, but I can assure him that there is no intent on the part of this Government to encourage the export of defence equipment to China.

[Steve Brine (Winchester) (Con)]

10. What objections his Department has made to applications for onshore wind farms in the last 12 months.

--- Later in debate ---

[Mr Robert Syms (Poole) (Con)]

11. Which urgent operational requirements he plans to bring into the core Ministry of Defence equipment programme.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

The future of equipment bought through the urgent operational requirement process for operations in Afghanistan is currently being considered, with a departmental provision of £1.5 billion to support such equipment over the next 10 years. I can confirm to my hon. Friend that we have already decided to bring some 2,000 protected mobility vehicles into the core programme, including 71 Coyote, 325 Husky, 441 Jackal, 439 Mastiff, 169 Ridgback and 60 Warthog vehicles. That represents a significant increase in the Army’s protected mobility capability, which I am sure he will welcome.

[Mr Syms]

I welcome that very comprehensive answer. I am pleased that we will make the maximum use of the equipment that was purchased for Afghanistan and that the Government are determined to increase the capability of the Army in Europe. What cost implications will that have for the core equipment programme, and will it have an impact on other aspects of the programme?

[Mr Dunne]

As I said to my hon. Friend in my fairly comprehensive initial answer, we have allocated £1.5 billion, which is essentially to support the elements being brought back into the core. The original capital cost was more than £5 billion in Iraq, and, I think, £7.6 billion in Iraq and Afghanistan combined. That is of course money that has already been spent, so it is not a continuing drain on the Ministry of Defence budget.

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

The Government previously announced that the cost of the Vanguard successor programme would be part of the MOD main core equipment budget. I note that today the Minister has published a document on the costings of the assessment phase of Vanguard. It makes reference to the alternatives review. Will he inform the House when the Department will be in a position to tell us the cost of that review?

[Mr Dunne]

I am sure that you would agree, Mr Speaker, that the successor programme could scarcely be described as an urgent operational requirement.

[Peter Luff (Mid Worcestershire) (Con)]

Let me take the House back to urgent operational requirements and the fairly comprehensive answer given by my hon. Friend. Will he update the House on the progress of the Foxhound vehicle, which began life as an urgent operational requirement and is now part of the core programme and performing very well?

[Mr Dunne]

With great pleasure, as my hon. Friend played a key role in commissioning the Foxhound vehicle. As he will recall, it was commissioned under the urgent operational requirement procedure but was always regarded as a core piece of equipment. We are well on the way to delivering 400 Foxhound vehicles to the British Army.

[Mr Dominic Raab (Esher and Walton) (Con)]

13. What support his Department is providing to veterans with mental health problems.

--- Later in debate ---

[Vernon Coaker (Gedling) (Lab)]

May I join the Defence Secretary in sending Christmas and new year wishes to members of our armed forces past and present and their families, whether abroad or in this country?

Once again the media are reporting concerns about a major defence issue based on a document obtained from the Ministry of Defence. Will the Secretary of State update the House on the planned privatisation of the Defence Support Group, which provides equipment repair and maintenance for our armed forces? Will he confirm that the US Government have raised significant concerns about intellectual property and that the sell-off is causing understandable nervousness in the Army?

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

As the hon. Gentleman will be aware, this Government do not comment on leaked documents. I can confirm, however, that the Defence Support Group is an important maintenance supplier to the British Army and that we are in discussions about the possibility of selling that entity, as has been made clear to him and to the Members of this House who have facilities in their constituencies. A decision will be taken in the first quarter of next year. We have had initial interest in this opportunity and we are well on top of the issues that have recently been identified in the press in relation to intellectual property and foreign IT.

[Vernon Coaker]

Well, there we have it—again. We have seen this one before and we all know how it ends. Despite warnings from Labour Members, the Defence Secretary pressed ahead with his fundamentally flawed plans for a GoCo before being forced to abandon them last week when it became clear that they would not work. Rather than go through that again, why do not the Government delay putting the Defence Support Group out to tender to allow a proper analysis of the implications of selling it off and to help to ensure that we do not end up with another GoCo no-go debacle? This is about our national interest and security; does not the Defence Secretary agree that we need to get it right?

[Mr Dunne]

The Defence Support Group provides maintenance and repair to platforms used by the British Army. It is entirely analogous to the maintenance and support repair facilities provided to surface and sub-surface ships in the Navy and to all the air platforms in the Air Force, which are all provided by private contractors, many of whom were put under contract under the previous Government.

[Andrew Selous (South West Bedfordshire) (Con)]

T4. I strongly welcome the improvements already made to the care of veterans, but do Ministers agree with the Prime Minister that more can be done in this area? Do they also agree that the Chavasse report written by Professor Tim Briggs, which has the support of the surgeon-general and others, points the way forward to even better care of veterans and reservists through better co-operation with the NHS and Defence Medical Services?

--- Later in debate ---

[Mr Dunne]

What I can say is that the activities at Sealand cover ECBU—the electronic and components business unit—which we have indicated would not form part of the sale, so it is most unlikely to apply.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

As we approach the next strategic defence and security review, may I invite the Secretary of State to consider leasing the V-22 Osprey—a multi-mission tilt-rotor aircraft—from the United States? Its unique design means that it moves faster and goes further than a Chinook and I hope the Secretary of State will agree that it provides enormous expeditionary capability, including the refuelling from the carrier of the joint-strike fighter.

Royal Navy Ships

Philip Dunne Excerpts

Tuesday 3rd December 2013 Westminster Hall

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

I am grateful to have been given fractionally less than 10 minutes to wind up the debate. As a result, I will unfortunately not be able to address all the points that hon. Members have raised, because to do so would consume my entire time. I will endeavour to write to hon. Members whose questions I do not address in my response.

I congratulate my hon. Friend the Member for Bournemouth East (Mr Ellwood) on securing the debate. As has been mentioned, he has become an expert not only in land matters but increasingly in maritime affairs. Other hon. Members have already referred to his paper for RUSI, which is a masterclass on how to pursue Ministers for answers to parliamentary questions and turn them into an authoritative document. I am pleased to have been able to contribute in some way to that process.

A number of colleagues have referred to the second aircraft carrier, and I would like to start by pointing out that our surface fleet is in the process of regeneration and renewal. As the hon. Member for Plymouth, Moor View (Alison Seabeck) indicated, this is an exciting time for the Royal Navy, as we transition from a legacy fleet into a new high-tech, latest-capability fleet. Aircraft carriers will be the next vessels to form part of that fleet. It is not appropriate to indicate at this point what will happen to the second carrier, so I am unable to give an answer to that question. As my right hon. Friend the Secretary of State for Defence has indicated in the House, however, a decision is expected to be made as part of the strategic defence and security review in 2015.

It is important to emphasise that we see the carrier strike capability as offering a step change in power projection, giving the UK the ability to project decisive political intent and military will at reach. The carrier has been designed as a multi-role platform in addition to carrier strike. In its littoral manoeuvre role, it will be able to land Royal Marines or special forces, evacuate non-combatants and deliver humanitarian aid, disaster relief or international defence diplomacy and engagement. The programme is on track to deliver an operational capability for carrier strike in 2020.

On the next platform upgrade—the Type 26 global combat ship—I have to be a little cautious in what I say, because the main gate investment decision will not be taken until the end of next year. I have been pressed by colleagues to advance investment decisions before the design is fully mature, but the Government have been clear that that was one of the reasons why we believe the previous Government got into some difficulty in major platform procurements. I was grateful to hear the hon. Member for Plymouth, Moor View acknowledge for, I believe, the first time in the Chamber that the previous Administration encountered some problems with procurement. I do not intend to place us in a similar situation by pre-announcing decisions before the designs are mature. We are making good progress with the design. Some 70% of the equipment systems have been selected or are being selected by the design authority, BAE Systems, and we have increasing confidence in the maturity of the design. It is being designed with modularity in mind, and I hope to cover that point before I conclude.

I would like to tackle head-on the claim that we heard yet again today about the impact on shipyards in Scotland of a yes vote in the Scottish referendum. Last week, the Scottish Government claimed in their White Paper that they would support the procurement of defence equipment and services in an independent Scotland, as we heard again today, claiming that to do so would protect the future of Scotland’s shipyards. However, the White Paper completely failed to acknowledge that, as part of the UK, companies in Scotland already benefit greatly from the billions of pounds of work that is placed with them to equip and support the UK armed forces. Thousands of people are employed in the defence sector in Scotland. The defence industry offers some of the best high-tech engineering jobs and opportunities in Scotland, and it contributes substantially to local economies across Scotland.

Orders for complex warships such as destroyers and the Queen Elizabeth-class aircraft carriers, on which some 4,000 people are currently employed in Scottish yards, were won only on the basis that the UK can choose to place or hold competition for such contracts domestically for national security reasons under an exemption from EU law. The UK has not placed an order for a complex warship outside its own borders in modern times. If Scotland were not part of the UK, it would not benefit from that national security exemption. The question of how defence jobs in Scotland would be sustained in an independent Scottish state remains wholly unanswered. The thousands of skilled defence jobs in Scotland are safer and more secure if the country remains part of the UK.

I will try to address the questions raised by my hon. Friend the Member for Bournemouth East, who made a thoughtful speech. He asked about modularity of systems and whether we can construct vessels that are capable of plug and play. A number of weapon systems and command systems that we seek to introduce in our vessels will be portable. Perhaps the most obvious recent example is the Sea Ceptor air defence missile, which we have recently contracted to introduce to the Type 23, with a view to transitioning it to the Type 26. As he mentioned, the system has many features in common with a version that is capable of being launched on land. That is the approach that we are taking to a number of defence assets. We are rationalising our helicopter fleets to allow greater interoperability between services. The Wildcat, which will be capable of being carried on our frigates and destroyers, will also be used by the Army Air Corps. Modularity and interoperability are features of the systems that we seek to introduce.

The flexibility of the Type 26 is provided by the mission bay, which is a much larger hangar space than that of the Type 23. It can carry a payload of 10 20-foot containers, a medical centre or a command and control centre. It can contain four landing craft for rapid response by Royal Marines. The vessel has been designed to have a smaller crew than that of the Type 23, but it can accommodate some 100 Royal Marines or other personnel for protracted engagements, or a much larger number of individuals for a short time, when the vessel performs an evacuation role. It will be the most flexible vessel of its kind and the most modern frigate design available in the world, so we believe that it will have some export potential—a point made by several hon. Members.

In the less than half a minute remaining to me, I will unfortunately not be able to address many of the questions that have been asked, but I would like to deal with numbers and commissioning. My hon. Friend the Member for New Forest East (Dr Lewis) gave me due notice of his questions. We intend to place an order towards the end of next year, once the design is mature, which we expect to be for eight vessels initially—

[Mr Jim Hood (in the Chair)]

Order.

Defence Reform Bill

Philip Dunne Excerpts

Wednesday 20th November 2013 Commons Chamber

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

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

This is the first time I have had the opportunity to serve under your chairmanship, Madam Deputy Speaker, and it is a great pleasure to welcome you to the Chair. I want to begin by thanking the members of the Public Bill Committee, who did an outstanding job in ensuring that the Bill was subject to detailed scrutiny. As a Committee, we benefited particularly from the expertise of those who are or have been members of the armed forces, both regulars and reserves, a number of whom have contributed to our debate today.

The Bill deals with important matters, some, I accept, of a rather technical nature. In particular, I would like to thank my hon. Friend the Member for Canterbury (Mr Brazier), who has had much praise heaped on him, quite properly, from all quarters of the House. He brought his deep understanding of current, and several historic, reserve issues to our deliberations in Committee and today. In fact, it was remarkable to be taken back by him well over a hundred years, thanks to his knowledge of reserve numbers before the first world war.

I should also like to thank the hon. Member for Plymouth, Moor View (Alison Seabeck) for fulfilling her promise on Second Reading to give the Bill a fair wind. I understand that she is not with us this evening. I completely understand why, and I ask her colleagues to pass on my kind words and hope that she shortly becomes a grandmother again. Her contributions in Committee were insightful and constructive, with the enthusiastic assistance of her shadow Front-Bench colleague, the hon. Member for North Durham (Mr Jones), who frequently brought his experience as a Defence Minister to bear on our proceedings. They both ensured that the Bill left Committee having been thoroughly examined, after more than 40 hours of debate.

Defence of the UK and the protection of our national interests can be achieved only if we provide our armed forces with the capabilities they need to operate effectively. We have a duty to them to ensure they have the tools they need in terms of manpower, training, equipment and logistical support. The Bill will allow significant improvements to the way in which defence operates in the two crucial areas of procurement of equipment and support, and of rebuilding our reserve forces.

There is widespread agreement that the procurement and support of defence equipment can and must be improved. It is clear from our debate in Committee that there is a consensus on the need for reform. In the past, under Governments of both parties, too often defence procurement has not delivered the equipment needed by our armed forces on time or within budget. By producing for the first time a balanced and affordable equipment programme, we have already made significant progress in improving the framework in which defence equipment is procured. Now is the time to make further structural changes to ensure that the ground we have already gained is not lost in the future.

The outline of our approach on procurement reform was set out in the White Paper “Better Defence Acquisition”, which we published on 10 June. Our preference, as we expressed around the time of the White Paper, is to transform the existing Defence Equipment and Support organisation into a Government-owned, contractor-operated organisation—a GoCo. But as we have explained, it not a foregone conclusion that a GoCo will be chosen instead of a public sector comparator, which we are calling DE&S-plus.

In addition, as was made clear in the written ministerial statement by my right hon. Friend the Secretary of State for Defence, the Cabinet Office and the Ministry of Defence have recently completed a review into the viability of the matériel strategy commercial competition. After a rigorous examination, it concluded that a viable commercial competition for a GoCo provider exists, albeit with risks. We welcomed this conclusion; indeed, we have already made considerable progress in addressing the recommendations and managing the risks the report highlights, including strengthening the DE&S-plus team.

The report also recommended that any further reduction in the number of bidders should stimulate a formal reconsideration and decision on whether to proceed further with the GoCo option. Last week, we received through this competition, which we have been running in parallel with the Bill, one bid for a GoCo from Materiel Acquisition Partners, a consortium led by Bechtel, with PA Consulting and PricewaterhouseCoopers. This is a complex, detailed proposal, running to more than 1,200 pages, which is currently being evaluated to understand what benefits it offers, at what cost and with what conditions. We intend to subject the bid to run a GoCo to a rigorous comparison with the public sector comparator, DE&S-plus. We expect a proposal from the team developing the DE&S-plus option shortly.

Colleagues have asked me, rightly, about what DE&S-plus means. As we have said, we believe that the GoCo option is most likely to embed and sustain the significant behavioural change required to transform defence acquisition, but we need to test this, and we are testing the GoCo proposition against the best that we could do wholly within the public sector. The DE&S-plus proposition is being worked up now. I cannot give much detail at this stage, as I would not want to compromise its proposal. What I can say is that we are focusing on ensuring an optimum balance between the need for an organisation that has the freedom to run its affairs in a way that best meets Ministry of Defence needs, and retaining and building on the values of the public sector. Should the GoCo option be the chosen way forward, the legislation that we have set out in part 1 of the Bill is essential to ensure that it can operate effectively without delay.

The Secretary of State’s written ministerial statement yesterday also announced the withdrawal of the other consortium competing to run a potential GoCo—clearly, that is regrettable. The Ministry of Defence, with the Cabinet Office and the Treasury, will now study the detailed proposal received from Materiel Acquisition Partners. In parallel, the DE&S-plus team will continue to refine and enhance their proposition. This analysis will inform a decision on whether it is in the public interest to proceed with only a single commercial bidder and a public sector comparator, and a further statement will be made once this process is complete. All I can say at this stage is that the bid we have on the table is substantial and from a consortium of world-class private sector businesses.

While analysing these proposals, we are going to continue to work with our allies and with industry, who have expressed a desire to understand how the potential changes to the matériel strategy for DE&S would work. We are confident that through this engagement we will work to determine how a GoCo would manage our international business and relations with industry as effectively as possible.

One of the most valuable aspects of the Committee was the opportunity it provided me to set out the GoCo proposal in greater detail than was possible in the White Paper. We have been able to describe the mechanisms, in addition to the legislation through which the Government will exercise strategic control over a GoCo. For example, through both this Bill and the contract, the GoCo will be required to protect information that is sensitive for national security or commercial reasons. Much of our debate in Committee centred on protecting confidential information and on intellectual property.

Open competition will usually be the best way of ensuring value for taxpayers’ money. However, sometimes there is only a single provider of a capability we require, and sometimes the need to maintain critical national industrial capabilities or sovereign control of the intellectual property in equipment programmes requires us to place contracts with UK companies without a competitive process. This so-called single-source procurement typically accounts for about 45%—some £6 billion a year—of the total that the Ministry of Defence spends on defence equipment and support, and it is likely to remain at that level for the foreseeable future.

The MOD currently uses a framework for single-source procurement that has remained largely unchanged for the past 45 years. It is a system that is failing the taxpayer—neither does it help industry to remain competitive in an increasingly globalised world. It is therefore in the interests of both the MOD and its suppliers to create a framework with incentives to deliver efficient and competitive behaviour. Part 2, based on the 2011 report by Lord Currie of Marylebone, addresses this need. It sets out a new framework based on transparency, with more and better information on costs, stronger supplier efficiency incentives and stronger governance arrangements. At its core is the principle that industry gets a fair profit in exchange for providing the Ministry of Defence with transparency on cost and better value for money. To oversee that new framework, the Bill will create a small, non-departmental public body to be known as the single source regulations office with approximately 30 staff. That will replace the existing pricing review board. The SSRO’s role will be to keep the statutory framework under review and to monitor adherence to it. The new arrangements will operate routinely through agreement between the Ministry of Defence and industry, but where agreement cannot be reached, the SSRO will have the power to make binding determinations on both parties.

Finally, the third part of the Bill relates to our reserve forces. We have already had a long debate on many aspects of that this afternoon and, as has been made clear by everyone who spoke, the reserves already make an important contribution to military effectiveness. The White Paper of July makes it clear that we expect them to make an even greater contribution in the future. We need to update the legislation that supports the revitalised reserve forces and their contribution to defence. Part 3 remedies that situation.

The title of the White Paper published by my right hon. Friend the Secretary of State last July encapsulates the Government’s attitude towards the reserve forces, as they are both “valuable and valued”. The Bill reflects that and replaces the outdated title of the Territorial Army with the Army Reserve, which not only far more accurately describes the reserves’ current role, but is a change that reservists themselves have resoundingly called for.

The Bill also allows reservists to be mobilised for the breadth of tasks carried out by regular forces, which is not currently the case. It recognises the contribution that employers make in supporting our reserve forces, by providing an additional monthly payment, per reservist, to small and medium-sized enterprises when their reservist employees are mobilised.

Finally, the Bill contains a measure to ensure that reservists are not disadvantaged by their reserve service. Reserve service does not count towards the two-year qualifying period for claims of unfair dismissal. For claims where the reason for dismissal is, or is primarily because, the individual is a reservist, we will remove that two-year qualifying period.

In conclusion, the thread that runs throughout the Bill is the need to deliver the equipment and support that our armed forces need, while ensuring a fair deal for reservists, their employers, industry and the public. The Bill makes important changes to the way in which we might deliver defence capabilities in future and I commend it to the House.

--- Later in debate ---

[Mr Jones]

I am pleased to hear that, but I am also rather sceptical about what the Secretary of State says. Clearly, the emphasis in Committee and the mood music have been that the GoCo seems to be the main show in town, and there has been scant examination of what DE&S-plus will do. We must ensure that as the process goes ahead and the Bill goes to the other place proper scrutiny is maintained. Not only is this a major change to how we procure defence equipment in this country but it will have an impact on our relationships with international allies.

[Mr Dunne]

I agree with the hon. Gentleman’s final point: this clearly needs to be scrutinised properly. However, let me gently make the point to him that part 1 of the Bill inevitably focused on a GoCo rather than DE&S-plus because DE&S-plus does not need legislation whereas a GoCo does.

[Mr Jones]

I accept that point, but the mood music coming out of the MOD seems to be that there is a concentration on the GoCo. We will certainly wait and see how things develop.

--- Later in debate ---

[Mr Arbuthnot]

The focus of debate today has been on the reserves, but the issue of the withdrawal of one of the only two remaining bidding consortia from the competition to run the equipment procurement for the Minister of Defence is central to the defence procurement of this country, and I would like to ask the Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne) to explain.

My right hon. Friend the Secretary of State intervened on the hon. Member for North Durham (Mr Jones) to say that the private sector bid will be weighed against the DE&S-plus bid, but I thought the review that my right hon. Friend announced yesterday was precisely into the question of whether that weighing-up would take place. I am not entirely sure that my right hon. Friend has got the Treasury and the Cabinet Office on his side on that point.

[Mr Dunne]

I will happily try to clarify the position to my right hon. Friend the Chairman of the Select Committee. There are two processes happening, one as a result of the single GoCo bidder. As was made very clear in the statement that my right hon. Friend laid before the House yesterday, that would require a further review across Government as to the validity of the competition. Secondly, we at the Ministry of Defence will be assessing the bid that we have on the table for a GoCo with the DE&S-plus proposal, when we have it, to see which provides the best solution for defence.

[Mr Arbuthnot]

I am grateful for that clarification. So when will my hon. Friend receive the DE&S-plus bid? It would be good if he knew exactly what that DE&S-plus bid was. Will it be days, weeks or months? It is an initiative forming within his own Department and it might be better that we all discover what it is sooner rather than later.

The Defence Committee has to take evidence on this fundamental shift in the circumstances surrounding the central plank of our country’s defence procurement. We need a clear time scale to know when we should take evidence, as Ministers need to realise. Scrutiny of what they do will be determined by the Select Committee and not by them.

Finally, to what do my right hon. Friend and my hon. Friend attribute the fact that they started with three private sector bidders and they are now down to one? What caused that?

Oral Answers to Questions

Philip Dunne Excerpts

Monday 4th November 2013 Commons Chamber

[Huw Irranca-Davies (Ogmore) (Lab)]

2. What assessment he has made of the level of contracting by his Department with small and medium-sized enterprises; and if he will make a statement.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

As I have said in the House before, the Government understand the significance of SMEs to the United Kingdom’s economy. The Ministry of Defence is playing its part in increasing the number of opportunities for SMEs to contribute to defence, both as direct suppliers and as subcontractors on major programmes. We recently published details of the MOD spend for 2012-13. Some £1.1 billion was spent directly with 12,000 SMEs. During that year, 10% of all new contracts by value and 36% by number were placed with more than 1,000 SMEs.

[Huw Irranca-Davies]

Jobs in the supply chain are vital to constituencies such as Ogmore, but I understand that last year the MOD was fined £21,000 for making late payments to suppliers. The new contracts and direct payments that were promised by Ministers have not materialised. Can the Minister explain to SMEs in the supply chain in Ogmore and throughout the United Kingdom why the Government’s actions do not match their rhetoric?

[Mr Dunne]

I am very glad that the hon. Gentleman has chosen to light on the single late payment penalty that the MOD suffered in just one of the 4 million transactions that took place in 2012-13. It involved a company that was not based in Ogmore, not based in Wales, and not based anywhere else in the United Kingdom. It was for late payment for aviation fuel sent by a supplier to our base in Akrotiri in Cyprus, with an invoice from a Greek company in Corinth, over the Christmas holidays. The Ministry of Defence pays 92% of its bills within five days, and has a better record in that regard than any other Department.

[Jeremy Lefroy (Stafford) (Con)]

I greatly welcome the letting of the main contract for the expansion of MOD Stafford to enable it to receive two more Signals regiments. Will the main contractor be encouraged to work with local SMEs which offer value for taxpayers’ money?

[Mr Dunne]

I think that my hon. Friend is referring to facilities management contracts which are being placed on a regional basis. The contractors will of course undertake to use SMEs in their supply chain, but it will be up to them to decide where they place their contracts, so I cannot give my hon. Friend any specific reassurance relating to how many of the subcontracts will go to Staffordshire companies.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

Although reassuring in many respects and full of detail, the Minister’s response will not give much comfort to SMEs that hold subcontracts with Serco and are awaiting the outcome of the Cabinet Office review, which I assume has been further delayed following this afternoon’s announcement by the Serious Fraud Office. This matter is of serious concern to, for instance, those involved in the consortiums that are bidding for the GoCo. When does the Minister expect a firm decision from his colleagues on whether the MOD can let further contracts to Serco?

[Mr Dunne]

As the hon. Lady said, there has been an announcement following the Serious Fraud Office inquiry into two contractors, which was first highlighted by the Ministry of Justice in its announcement of 26 September. I cannot give her any information about when the SFO will complete its inquiries, and she would not expect me to do so. Until that has happened, we shall not be in a position to make any comment on Serco itself.

[Sheryll Murray (South East Cornwall) (Con)]

A constituent of mine is considering installing on his farm an anaerobic digestion plant that could supply heat to HMS Raleigh. Will my hon. Friend agree to meet my constituent and me to discuss that?

[Mr Dunne]

I am grateful to the hon. Lady for mentioning her interest in encouraging the supply of renewable energy to Ministry of Defence bases throughout the country as well as in her constituency. The matter that she has raised is the responsibility of the Under-Secretary of State for Defence, my hon. Friend the Member for South West Wiltshire (Dr Murrison), but I am sure that one of us will be happy to meet her as soon as possible.

[Mark Menzies (Fylde) (Con)]

3. What discussions he has had with his counterparts in partner nations on improving the prospects of future Typhoon exports.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

Since the Government took office in 2010, they have reversed a decade of neglect in support for defence exports. Ministers from the Prime Minister down have taken a particularly proactive lead among our partners in encouraging Typhoon exports. Eurofighter Typhoon continues to attract global interest through active participation in a number of campaigns, which are likely to come to a head over the next couple of years. Last week, when I met counterparts from our three partner nations, we agreed to refocus our collaborative programme to improve Typhoon’s export prospects in those campaigns around the world.

[Mark Menzies]

Does the Minister believe that to keep the Typhoon production line running in the future, the Eurofighter consortium must be much more agile in its corporate governance in order to help export potential?

[Mr Dunne]

In our meeting last week I made very clear to both industry and our Eurofighter partners that we need an increased focus on responding to export requirements, which will play an increasingly important part in extending production lines for this aircraft, including in my hon. Friend’s constituency. We agreed that fundamental reforms are needed to speed up decision-making processes within the governance structure, which will make it more responsive both to the requirements of partner nations and to export customers.

[Mr David Heath (Somerton and Frome) (LD)]

4. What his plans are for the future use of RNAS Yeovilton and RNAS Merryfield; and if he will make a statement.

--- Later in debate ---

[Nick Smith (Blaenau Gwent) (Lab)]

12. What account his Department takes of the social and economic effects of its procurement decisions in the UK.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

Last year, we published the White Paper, “National Security Through Technology”, setting out the purpose of defence procurement—namely, to provide our armed forces with the best capabilities we can afford while obtaining the best possible value for money. The Ministry of Defence makes a significant contribution to the UK economy—approximately £20 billion of annual spend sustaining many highly skilled jobs in communities the length and breadth of Britain—but we also support the defence industry in the UK through active help in export campaigns and in supporting the defence growth partnership, where we share its vision to secure a thriving UK defence sector.

[Nick Smith]

It is good that the NATO summit will be held in Newport in Wales next year. Will the Minister please update me on the procurement of the Scout vehicle, which is important for jobs in the south Wales valleys?

[Mr Dunne]

I add my support to the hon. Gentleman’s efforts to ensure that the NATO summit in Newport is a great success next year. The Scout vehicle is proceeding in its demonstration phase and has passed a number of milestones. As he is aware, it is due to be delivered as part of Future Force 2020. I will not be able to give him an update on the next placing of contracts until such time as the main investment case has been made.

[Peter Luff (Mid Worcestershire) (Con)]

It will not surprise the Minister to learn that I entirely agree with his answer, but may I ask him, on the day when Professor John Perkins’ review of engineering skills has revealed a serious shortage of those skills in this country, what assessment he has made of the impact of that shortage on the defence industries in particular, and on the nation’s operational advantage and freedom of action?

[Mr Dunne]

I thank my hon. Friend for all his work in stimulating interest among our young people in taking up engineering careers, particularly so that they can take up the many hundreds of engineering jobs for which the Ministry of Defence and the armed forces seek to recruit every year. We are doing a lot of work, not least through the Bloodhound initiative—a project with which he was intimately involved—to raise awareness of engineering skills in the armed forces, and to encourage young people to consider maths, science and engineering as future careers.

[Joan Walley (Stoke-on-Trent North) (Lab)]

14. What contracts for recruitment of armed forces personnel have been outsourced to date; and what arrangements are in place to monitor such contracts.

--- Later in debate ---

[Bill Esterson (Sefton Central) (Lab)]

Small businesses in my constituency tell me that late payment threatens their survival and the jobs of their staff. Ministers can quote all the figures they like, but they have to accept that late payment by the MOD is a real problem for some small businesses.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

If the hon. Gentleman was in the Chamber and listening to my earlier response to the Member for Ogmore (Huw Irranca-Davies), he will have heard that there was a single example of a penalty for late payment out of 4 million transactions last year. Where is the evidence to substantiate the allegation made by the hon. Member for Sefton Central (Bill Esterson)?

[Nigel Adams (Selby and Ainsty) (Con)]

T8. What discussions has the Secretary of State had with European Ministers on preparations for the European Council on defence?

--- Later in debate ---

[George Hollingbery (Meon Valley) (Con)]

T10. The Meon Valley constituency is home to many who work in the defence sector for companies such as Northrop Grumman, Chemring, Cobham and many smaller defence-related businesses. Will the Secretary of State update the House on what efforts the Government are making to boost employment in this sector, which is so important to the prospects of many of my constituents?

[Mr Dunne]

The three companies to which my hon. Friend refers are important suppliers to the Ministry of Defence through both open competition and single-source capability. I encourage each of those companies to continue bidding for relevant MOD contracts when they are advertised through the portals that are well known to them. I have met representatives of each company at recent defence company exhibitions both in the UK at the Defence Security and Equipment International exhibition in September and overseas. Along with Ministers from other Departments, we actively support responsible defence exports by all quality British companies.

[Nic Dakin (Scunthorpe) (Lab)]

What is the MOD doing to improve its communication with local communities when bases, such as the one in Kirton in Lindsey, are being transferred out of MOD ownership?

--- Later in debate ---

[Huw Irranca-Davies (Ogmore) (Lab)]

The Minister’s earlier response to me was shockingly complacent and refused, notably, to deal with new contracts and the failure to roll out direct payments, as the Government said they would. Will he respond to my constituents who run small and medium-sized enterprises that supply the MOD? They said:

“The MOD remains as inefficient as ever…Their commercial support is lacking and things take for ever to finalise…The MOD is in a mess in some areas we deal with.”

[Mr Dunne]

I am sorry that I disappointed the hon. Gentleman, who had clearly got his facts wrong when he stood up the first time. This Ministry pays 92% of bills within five days, and we make arrangements specifically for small and medium-sized companies to make part payments to assist them with their cash flow. I would be happy for the hon. Gentleman to write to me if he has any other specific evidence to substantiate his claim.

[Bob Stewart (Beckenham) (Con)]

May I ask my right hon. Friend what percentage of the £1.8 billion allocated to bolster reserve forces has been spent already?

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[Mark Pawsey (Rugby) (Con)]

Given previous failures, the Government are rightfully changing the framework for defence procurement, which generates a £22 billion turnover. Will the Minister confirm that under the new arrangements there will be more opportunities for small businesses to get their fair share of that expenditure?

[Mr Dunne]

I pay tribute to my hon. Friend’s contribution in the Defence Reform Bill Committee. He has consistently championed the role of small businesses in defence procurement—something that the Government wish to take forward. Tomorrow, I will chair the SME forum at the Centre for Defence Enterprise in Harwell, and I will be picking up on those points.

[Several hon. Members]

rose—