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Us Defence Procurement Policy

Volume 407: debated on Monday 23 June 2003

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If he will make a statement on the impact of US defence procurement policy on the UK defence industry. [120544)

The United States is the second largest market for United Kingdom defence products, and US defence procurement policy impacts very directly on the UK defence industry. At present, the US spends only about 2.5 per cent. of its procurement budget overseas, and UK industry has succeeded in securing half of that business, worth £1 billion a year. We are working with UK industry and the US Government to widen the scope for the involvement of our industry in American procurement, and we believe that that will be to the advantage of both. A more open and transparent defence market will serve our joint goals of better value for money and developing an efficient and innovative defence industry.

I thank the Minister for his expansive answer, but he will be aware that a Bill on defence authorisation is quietly slipping through Congress. Its provisions, the White House says, are

"burdensome, counterproductive, and have the potential to degrade U.S. military capabilities."
Moreover, it threatens the joint strike fighter programme if passed.n its current form, affecting £200 billion-worth of the programme and thousands of jobs both here and internationally. Will my right hon. Friend make representations to the US Administration to make sure that that Bill is amended accordingly?

My hon. Friend raises an important issue. My earlier answer showed the importance of US defence procurement to UK industry, and we are always trying to improve our export capabilities, not just into that market but elsewhere. Because of those important considerations, we do make representations of the type that my hon. Friend asked about, but it is not just about selling equipment; it is about ensuring that there is interoperability between NATO's defence forces, and the open market is the best way to achieve that.

May we, too, add our welcome to the Under-Secretary of State for Defence, the hon. Member for Hove (Mr. Caplin), in his new ministerial post, and add our tribute to his predecessor for all his work? We also congratulate the Government on the progress that they have made with the US Administration on supporting defence sales between our countries. However, with only one major domestic defence contractor left, does the Minister agree that it is important that the Government ensure that BAE Systems continues to be independent and is not vulnerable to an international takeover or merger, thus ensuring that true international competition will continue?

It is not strictly true, whatever the hon. Gentleman says, that there is only one major defence company left, as 150,000 jobs in this country are tied up in defence. I do not know whether he was ruling out Rolls-Royce or whether it is the company that he was referring to. I do not know whether he was ruling out Thales, a major defence presence in this country. I do not know which major company he was referring to. However, I welcome his recognition of what we are doing to ensure that we fully exploit our relationship with the US in the marketplace to the best advantage of our economy and the US economy as well. However, we must also bear in mind the need to ensure that our equipment has an interoperative capability, which serves us all well in NATO and elsewhere.

One organisation that successfully secured American procurement work is the Defence Aviation Repair Agency, which repairs components for Apache helicopters. Will my right hon. Friend do all he can to ensure that that organisation attracts more work, especially in the run-up to the completion of the Red Dragon project, and will he agree to meet me to discuss ways of achieving that for DARA?

I fully recognise the strong role played by my hon. Friend in promoting the, cause of DARA. As the sole owner, in technical terms, of that organisation, I well understand the points that he makes. DARA has been successful in securing commercial contracts. The establishment of the trading fund provided that opportunity, and I pay tribute to the management and staff of DARA for all that they have achieved. The Red Dragon project represents a clear commitment to the future, and I was pleased to be able to agree to those proposals. Yes, I will meet my hon. Friend to discuss these matters, if he wishes, sooner rather than later.

Given British Aerospace's view that the Government's defence industrial policy does it few favours, and last week's warning from the Society of British Aerospace Companies that that world-beating industry faces a further 15,000 job losses on top of the 20,000 that it suffered last year, what has the Prime Minister done to use his influence to secure a dividend from the United States for British support for the US on Iraq, by obtaining better access for British defence exports to the US? Is not the least that we can expect that he should resist the legislation mentioned by the hon. Member for Ogmore (Huw Irranca-Davies)? While we are speaking of defence procurement, can the Minister tell us what the Government will do in the event that British Aerospace decides that its only future is to be swallowed up by a US company?

We shall have to take each step as it comes in responding to any change in the defence marketplace in terms of individual companies and possible amalgamations. The national interest would, of course, be uppermost in our mind in any future restructuring. That must be considered when assessing any future relationship. The hon. Gentleman should know that the measure to which he referred is known as the ITAR—international trade and arms regulations—waiver. Considerable progress has been made on that, but not as much as we would have liked, because matters intervened: first, the change of Administration and the need to build new relationships; secondly, the Afghanistan conflict; and then the Iraq conflict, which tied up a significant number of people. However, four of the seven key principles have now been signed off, and I have no doubt that the Prime Minister will continue to bring whatever influence he can to bear with the US Administration to ensure the future of the British economy.