Aerospace Industry

Debate between Philip Hollobone and Iain Wright

Tuesday 2nd September 2014 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

Order. To draw his remarks to a close, I call Iain Wright.

[Mr Wright]

My final point, as has been mentioned several times, is about ensuring that British firms are competing on a level international playing field. What steps are the Government taking with the European Commission and the WTO to ensure that rules are complied with and enforced, so that there is a level playing field?

Aerospace is a massive success story for Britain, which needs to continue not only next year but for the next few decades. There is cross-party support, and I hope that the Minister will address our points in his response.

Arms Exports

Debate between Philip Hollobone and Iain Wright

Thursday 13th December 2012 Westminster Hall

[Mr Iain Wright (Hartlepool) (Lab)]

That sounds like a target to me, Mr Hollobone. It is a pleasure to serve under your chairmanship. This is a very important topic, considered by extremely important and serious Committees of the House, and the quality, if not the quantity, of the speeches this afternoon has matched the importance of the matter under consideration. I pay tribute to those who have spoken: the right hon. Member for Tonbridge and Malling (Sir John Stanley), who is the Chair of the Committees on Arms Export Controls and a member of the Foreign Affairs Committee; my hon. Friend the Member for Ilford South (Mike Gapes), who is the former and very distinguished Chair of Foreign Affairs Committee; and my hon. Friend the Member for North Ayrshire and Arran (Katy Clark).

As the report somewhat immodestly, but nevertheless entirely correctly, points out, the Committees on Arms Export Controls have scrutinised, in unprecedented detail, the Government’s latest report on strategic export controls, their quarterly information on individual export licence approvals and refusals, their policies and performance on arms export controls, and arms trade policy in general.

The report is substantial and weighty, in every sense, and it is a credit to the Committees and the Members who have undertaken the work in such painstaking detail. They pack a punch when it comes to the Government listening to what they have said, for example, about ensuring that the strategic export controls annual reports are presented to the House by the four relevant Secretaries of State, rather than by junior Ministers, as was mentioned by the right hon. Member for Tonbridge and Malling. It is testimony to the Committees’ strength of purpose that the Government have listened. Equally, it is through the determination of the Committees that this debate has become an annual fixture in the parliamentary calendar. That encourages greater scrutiny, transparency and accountability—themes that have been a large part of today’s debate and to which I shall return. I hope that this annual debate will be embedded as a permanent fixture in the House’s calendar.

It must not be forgotten that the defence export industry is an important contributor to the UK economy. Britain is the world’s second largest defence exporter, and our defence export industry is worth an estimated £35 billion. It makes up about a tenth of our manufacturing base, employs directly and indirectly about 300,000 people and is a leading driver of this country’s innovation ecosystem. There are more small and medium-sized enterprises operating in the UK defence manufacturing sector than in France, Italy, Germany and Spain combined. Research and development undertaken in the defence manufacturing sector not only makes our country safer, in that it ensures that we have access to state-of-the-art defence technology, but has commercial spin-offs in complementary sectors such as aerospace and automotives. The UK rightly has ambitions to continue to play a leading role in the global markets of those sectors.

The UK defence manufacturing sector also helps this country to achieve its foreign policy objectives, one of which, quite rightly, is always to ensure that civilian casualties from operations are avoided, or at the very least minimised. In the Libya operation, for example, the sophisticated Brimstone missile, developed by British-based MBDA, played a pivotal role in ensuring that specific targets, such as tanks and missiles, were destroyed, while avoiding civilian casualties, due to its technological ability.

Libya and last year’s Arab spring—on which all Members have commented—have presented all too vividly, however, the question whether the system of controls over defence exports is appropriate. All countries have the right to defend themselves, and defence exports are an important part of our manufacturing sector, but the key question that the Committees have rightly considered in the report is whether we should strengthen the system still further, to ensure that we do not sell defence equipment to countries that are volatile and to regimes that have poor human rights records or might use the equipment to repress their own people.

I have mentioned the importance of defence manufacturers, particularly with regards to exports, and that importance is only likely to increase in the next few decades. I hope that the Minister does not take my next remarks as a narrow partisan criticism—that is genuinely not my intention—but because of reductions in the domestic defence budget, UK defence manufacturers will have to look overseas at export markets if they are to maintain or grow revenues. In many ways, that is not necessarily a bad thing, and we are already seeing it in the statistics: ADS, in its review of 2012, stated that spending cuts have led to an 18% year-on-year fall in domestic orders and a 2% fall in the work force. That has been compensated, to some extent, by a sharp rise in exports, which were up 12% in 2011, so the defence exports market now constitutes 48% of all UK defence revenue—up from 43%. The areas of the world in which defence exports are particularly increasing include the middle east, which is volatile and expected to remain so in the near future.

The trends in global defence exports business will, I think, put a strain on the export controls system in different ways. In general policy terms, I hope that the Minister will reiterate the need for strong, if not stronger, controls on exports and will not dilute this long-standing British approach in the face of possible economic and industrial pressure to increase export performance.

In specific terms, there is evidence that pressure is being placed on the system. There seems to be deterioration in the percentage of standard individual export licences processed within the 20-day and 60-day limits, which is linked to a steady rise in the number of applications. That reflects the strain in the system, although no doubt the Minister will say, as the Government’s response does, that targets have been met in 2012.

Given those trends in global defence export markets and the prospect of more UK defence firms seeking greater export opportunities in volatile global areas, the figures on performance show that the system is finding it difficult to cope now, and in future it will have to do so with reduced resources. Will the Minister comment on that?

Similarly, does the Minister agree that as much simplicity and certainty as possible should be provided to firms thinking of exporting in this field? When I read the transcripts of the Committees’ evidence sessions, I was struck by the report that some manufacturing firms thought in the aftermath of the Arab spring that there was a blanket ban on selling to the middle east and so missed out on potentially lucrative commercial opportunities. Clearly, better communication is required for the benefit of industry, both to provide opportunities in the marketplace and to set out clearly what is and is not permitted to be sold and to which countries. Will the Minister outline how he is working within his Department, with UK Trade and Investment and across the Government and business to provide that greater clarity and better communication for industry?

Additionally, I hope the Minister will say something on enforcement, which has been a central theme of today’s debate. I was struck on reading the Committees’ evidence hearings that enforcement is considered to be an issue. One witness said “capacity is certainly worse” on effective enforcement than it was five years ago. The right hon. Member for Tonbridge and Malling, in his opening remarks, told us about torture equipment being publicised at a trade fair here in the UK. In general, how will the Minister ensure that he strengthens controls, improves performance of applications, tightens up enforcement capability and achieves better clarity and communication?

Talk of enforcement brings me to the concerns raised in the report on so-called brass-plate companies. The system of export controls should in principle prohibit the operation of companies registered in the UK but operating in arms dealing from overseas with virtual impunity. However, enforcement is clearly a concern. More should be done to prevent the practice of brass-plate companies, and the report makes it clear that

“the Government has failed to provide a substantive response to its recommendation”

from last year. Additionally, it took 10 months for the Government to respond to the Committees’ conclusions and recommendations on that issue and other matters. Will the Minister outline what precise action he will take? In particular, will he use the Companies Act 2006 to dissolve companies that operate in that way against the public interest?

The right hon. Member for Tonbridge and Malling has been far more eloquent than me on extraterritorial legislation, both today and in the past. The Committees on Arms Export Controls have always been consistent in arguing that, on issues as important as arms exports, extraterritoriality should be expanded to cover all types of arms export. The current system, as the Minister knows, is based on a three-tier categorisation, and both this Government and the previous Government have worked on moving some specific goods from category C to category B to tighten enforcement. Anti-vehicle land mines, for example, were moved from category C to category B in 2010. The Committees want extraterritoriality extended to category C goods to address, as the right hon. Gentleman has said, wholly anomalous circumstances. Will the Minister update hon. Members on the Government’s thinking on that important matter?

Assessment of risk is the central element of an effective and responsible export control system. If we are to export defence equipment but are determined to do so responsibly and, as far as possible, ethically, assessment of risk is vital. In light of events in the Arab spring and subsequent developments, as my hon. Friend the Member for Ilford South said, it seems clear that that needs further consideration.

At present, emphasis is given within the process to retrospective assessment. The consolidated criteria will ensure that Ministers consider whether there is evidence of a Government having previously breached criteria. In light of changing events, the system tries to suspend licences quickly, with rapid revocation of export licences. During the witness sessions, that was described as shutting the stable doors more quickly after the horse had bolted.

The Arab spring has demonstrated that past stability is not a guarantee against future volatility or future repression of domestic populations. Does the Minister accept that greater work needs to be done to shift the balance away from retrospection towards the consideration of existing or emerging social, economic and political drivers of instability? I fully appreciate the difficulty and complexity of such an approach and accept that hindsight is a wonderful asset on such matters.

The Arab spring, however, shows that the revocation and suspension of licences occur largely after items have left UK shores. If the policy objective, which I think we all share, is the prevention of the sale of arms or defence equipment to those regimes with a likelihood of external aggression or internal repression, it is important to consider how better to assess and mitigate that risk. Does the Minister accept that such an approach might provide more effective assessment? Will he elaborate on how the assessment of risk is now being reconsidered?

The CAEC and this annual debate have, as the right hon. Member for Tonbridge and Malling said, moved a great deal towards improving parliamentary scrutiny, building on improvements over the past decade. It is now 10 years since the then Labour Government introduced the Export Control Act 2002, which provides for parliamentary scrutiny of new export control orders. A statutory instrument containing a control order must be approved by affirmative resolution in each House within 40 days of the order being laid.

Although, as we have heard, Britain has some of the tightest regulations in the world, I think we all accept that there should never be room for complacency. Parliament should be considering further ways to improve the situation, enhance transparency and accountability and allow the House greater opportunity to scrutinise decisions. I was particularly taken with what the right hon. Gentleman said about his remarks to the Bundestag and his imminent remarks to the National Assembly in Paris. I want us to remain the tightest jurisdiction in the world on strategic export controls, and Parliament has a key role to play in that.

The current system scrutinises a ministerial decision once it has been taken, but there is an opportunity to consider a system of pre-scrutiny for export decisions. We would like that to be considered as a means to ensure greater parliamentary oversight, to provide a cross-party consensus on issues that are important to our country economically and industrially and to our country’s foreign policy, security and ethical objectives and obligations, and to help to guide final ministerial decisions. We do not wish additional scrutiny to impose delays on decision making or to add additional bureaucracy, but we believe such an approach could improve transparency and add a greater dash of both robustness and consensus to that important decision-making process, as other countries do.

In the United States, for example, Congress—specifically the Senate Foreign Relations Committee, the House International Relations Committee and the House and Senate Appropriations Committee—is given prior notification of all foreign military sales and can object ahead of the Administration making a decision. That system of prior scrutiny has not harmed the competitive position of the United States; it remains by far the No. 1 defence exporter in the world and has seen sales increase by 34% in the five-year period from 2006 to 2011. Will the Minister say whether the Government will consider such an approach in the UK?

The right hon. Member for Tonbridge and Malling mentioned the arms trade treaty, which is the final issue that I want to raise. Will the Minister update hon. Members on where we are, particularly with the negotiations and the possible conclusion of the arms trade treaty?

As the right hon. Gentleman said, this matter was discussed at the UN in the summer, but a conclusion looks no closer to materialising than it did last year, and another conference is being convened at the UN in March 2013 to discuss it further. The prospects of an international agreement seem as remote as ever. In those circumstances, it would be useful if the Minister elaborated a little more on that and provided the House with an explanation about when he thinks the treaty will be finalised, agreed and ratified and what the Government are doing in diplomatic circles to achieve that objective. I agree with the right hon. Gentleman and my hon. Friends about trying to tease out from the Minister what he is doing about breaking with consensus in the international team, to achieve some ratification.

This has been an important debate. I reiterate my thanks to the Committees for their hard work, dedication and extraordinary attention to detail on this issue. There does not have to be a conflict between a strong, internationally competitive UK defence industrial sector and equally strong export controls; indeed, they are complementary. Reputation is everything in business and the “Made in Britain” tag is a hallmark, not only of high and innovative manufacturing quality, but of responsible and ethical practices in exports. We must maintain and enhance that reputation, as we must maintain and enhance our competitiveness in the global markets in which we compete.

It is clear from today’s debate that the House wants to engage with the Government on this agenda in a constructive and cross-party approach. We in the Opposition wish to do so, too. I look forward to hearing from the Minister about how we can go about achieving that shared objective for the good of our country.

[Mr Philip Hollobone (in the Chair)]

If the Minister does not use up all the time available to him, I should like to call Sir John Stanley again to make a few concluding remarks.