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Defence Exports

Volume 464: debated on Wednesday 17 October 2007

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Roy.]

The House is rightly concentrating on defence, with a debate in the main Chamber last week and another debate yesterday. The hon. Member for Newbury (Mr. Benyon) has secured an important debate here in Westminster Hall today.

It is a great pleasure to serve under your watchful eye this morning, Sir Nicholas. I also welcome the Minister to his place. I suspect that the Ministry of Defence and the Department for Business, Enterprise and Regulatory Reform had a battle to decide which would reply to the debate. It is a matter of huge regret that the Minister’s Department lost but, nevertheless, in a personal sense, it is good to see him here.

The Prime Minister, in his leadership acceptance speech, said:

“One of my first acts as prime minister would be to restore power to Parliament in order to build the trust of the British people in our democracy.”

We all welcomed that statement. Today, we have an opportunity to hold the Government to account for what I believe is the classically bad decision to close the Defence Export Services Organisation and move its residual role to another Department. On 25 July—the day before parliament rose for the recess—the Prime Minister went very much against what he said in his speech by sneaking out a written statement of just 19 lines that brought to an end 40 years of successful Government support for our defence export sector. Some people will call me naive, but I hope for some answers from the Minister this morning about the closure of DESO.

I chose the subject of this debate carefully, as I want to point out how damaging the decision is, and what impact it will have on the future of defence exports. I want to know what was going on in the Prime Minister’s head—I think that we all do from time to time—that led him to do such damage to such a successful brand. And let us be assured: the brand is dead. Whatever arises from DESO’s ashes, the perception in the marketplace is that Britain is out of the game. The best people are leaving to work in the private sector and there is a general belief in the marketplace that the British Government want nothing to do with defence exports. I noticed how happy some organisations opposed to the arms trade were with the decision, and there was talk of parties being held after the announcement. However, I submit that their joy should be short-lived.

One group of people who, I am sure, are delighted at the decision are members of the Liberal Democrat party, who have always been enemies of defence exports, no matter how legitimate and proper. Has my hon. Friend any idea why there is not a single Liberal Democrat present in the debate—not even their spokesman?

I suspect that they have other things on their mind at the moment, but they should not delight in the decision. Perhaps they mistakenly believe that stopping arms sales and defence exports from this country will somehow improve the situation around the world. Countries such as Russia and China are salivating at the prospect of expanding their defence export sales at our expense. The consequence will be an expanded manufacturing base in those countries which, unlike us, do not care much about the question of to whom they sell arms. That is the great mistake of the Liberal Democrats and others opposed to the arms trade.

Does the hon. Gentleman acknowledge the fact that it is possible to rejoice in the imminent demise of DESO without necessarily being against defence exports as such, and does he accept the estimate made by many reputable economists that the section of the economy linked to defence exports is less than 0.2 per cent.—less than one job in 500? That is not exactly a body blow to the British economy, is it?

That is one of the most dangerous and complacent views that I have heard on the whole issue. I have constituents working for small companies of 25 people that depend on DESO when they go abroad. Those companies do not have a large marketing department. They do not know how the economy and marketplace work in some countries. They go straight to the post. If the hon. Gentleman thinks that £5 billion a year of arms sales and defence exports is insignificant to the economy, I urge him to consider the tax take from those companies, and what the effect will be on hospitals, police and public services in his constituency.

The debate is intended to draw out from the Minister important answers to important questions: why the Prime Minister took the decision, and why it was dealt with in such an underhand and incompetent way. The decision came only a few days after the Prime Minister called for government to be more open and accountable. I cannot think of a decision that was more closed or more designed to avoid being held to account. It came less than 10 days after an advertisement appeared in The Sunday Times advertising the post of director of DESO. Why was the decision made without any provision for what would fill the vacuum created by DESO’s demise? At the very least, one would expect the most basic measures to be in place for what was to come post-DESO.

Internal briefing documents for staff about that extraordinary decision are flying around Whitehall and Westminster. They are in question-and-answer form, and some of them have fallen into my hands and my colleagues’ hands. The answer to one question is:

“How UKTI will manage their responsibility for defence trade promotion remains to be decided.”

Another question asks:

“Where will the transferred staff be located”?

The answers states that that is “to be decided.” The answer to the question of whether staff will

“transfer to UKTI on the same terms and conditions as they have now”

is that that will be

“worked out during the implementation and planning phase.”

Another question asks:

“What will happen to the (Army) Export Support Team?”

Importantly—and this relates to the point made by the hon. Member for North-West Leicestershire (David Taylor)—the answer, again, is that that is “to be decided.” The question of what will happen to the DESO first secretaries overseas, too, is “to be decided.” What an extraordinary decision from a Government who claim to be competent, open and accountable. How extraordinary to make a major change to a Department and to have nothing in place—nothing; a vacuum.

Why was there no consultation with industry? In a debate last week, several Members quoted letters from large companies—one was from the managing director of BAE Systems—and companies such as Thales. Many other letters in circulation have come to my attention. Why was there no consultation with the unions, as required under civil service codes? For the past few days, I have been talking to the unions, and I can find no evidence of any formal briefings, discussions or consultations about what transfers will take place or under what conditions DESO employees will be employed in any new organisation. More importantly, why was there no consultation with Ministers? I think that the House deserves to know when the Secretaries of State for Defence and for Business, Enterprise and Regulatory Reform were informed of the decision. I would that that happened on or around 25 July, and that it was as much a surprise for them as it was for the rest of us.

Why was the decision taken in a manner designed to prevent proper parliamentary scrutiny? The House, the industry and its hundreds of thousands of employees, as well as the dedicated staff at DESO, deserve answers. I do not wish to prejudge the Minister, but I must warn him that it would be contemptible if in his reply he simply dished out the usual blandishments and non-answers about how DESO has done excellent work in the past. We know about that, and accept that it is a remarkable organisation.

The announcement did not relate to the end of the British defence industry; it related to the imminent demise of DESO, which employs about 450 staff in London and overseas, including 200 who work on Government-to-Government contracts. If a large employer of, say 1,000, 2,000 or 5,000 employees had their operating base closed by Government edict, the hon. Gentleman would expect a statement to the House and consultation at the highest level, but we are talking about 450 jobs, and those people will be readily redeployed in other areas of Government industry.

I hope to prove to the hon. Gentleman that his view is mistaken. It is of fundamental importance that DESO should remain part of the MOD. He is right: we are talking about only 400 or so people, but there are much wider implications for the economy as a whole.

I congratulate my hon. Friend on securing the debate. The intervention from the hon. Member for North-West Leicestershire (David Taylor) betrays a lack of understanding of the specialist requirements of defence exports, which are an extremely complicated area of business to manage. They are of fundamental importance not only to our economy, but to the armed forces, because a successful British defence export base supports our forces and ensures that they have more kit than they would otherwise have for the requisite defence budget.

Order. Interventions should be brief, so the hon. Gentleman should bring his remarks to a fairly speedy conclusion.

I am grateful to you, Sir Nicholas. I congratulate my hon. Friend on securing the debate and I look forward to the Minister’s reply.

I am grateful to my hon. Friend for putting more eloquently than I could have done the argument I was about to make in response to the point made by the hon. Member for North-West Leicestershire.

I hope that the Minister will not claim that defence exports would be better served by operating within UK Trade and Investment. The Minister knows that nobody outside the Prime Minister’s narrow circle and one or two Labour Back Benchers believes that that is the case. To take up the point made by my hon. Friend, as of this weekend, the DESO website—I suspect that the announcement will not be there in a few hours’ time—says with a pride which, I am sure is matched by that of the dedicated DESO staff, that it gives

“assistance to company-led marketing campaigns”.

It says that it supports the “MOD’s defence diplomacy efforts” and its “partnerships and alliances”. It says that it offers “security building measures” and promotes

“British interest and influence abroad”.

Those are four good reasons—key strategic reasons—for keeping DESO, or that Government discipline, in the MOD.

The Government support all exporters through their agencies, but defence exporters need support from the MOD, mainly because they sell to overseas defence ministries. DESO’s website states that it is

“an integral part of the Ministry of Defence”

and

“is well placed to give defence industry the kinds of support it needs”.

My hon. Friend should remember in his excellent speech that the point of DESO was that it was separate from the various dud organisations that have promoted—allegedly—British exports overseas under Governments of both parties. Such organisations were monstrous bureaucracies, but DESO was lean, extremely fit, and accomplished. That is why it attracted the Prime Minister’s opprobrium.

My hon. Friend has huge experience in this field and I hope that he will contribute more to the debate, but he is absolutely right. We are talking about a highly technical economic activity and it is vital both that it is linked to service personnel, who understand the equipment that DESO helps to sell, and that there is hands-on use of the equipment in the field.

The DESO website states that its activities

“differ from those in the civil sector in many respects because of the specialised requirements of…military customers”.

My hon. Friend is right that DESO is a lean organisation. It does not operate under the leaden hand of departmental organisations that seek to help business but which sometimes have the opposite effect.

DESO has 460 staff worldwide and about 200 in the UK—that number is falling rapidly—and has an annual net budget of £16 million, which is paltry in terms of MOD spending. However, it assisted with £500 million-worth of sales last year and contributed massively to the value of defence exports, which averaged £5 billion. The DESO brand is trusted around the world, which has helped to place Britain second only to the United States in defence exports.

The hon. Gentleman said that DESO is a trusted brand. Does he believe that that trust was damaged by the organisation’s involvement in the al-Yamamah deal with Saudi Arabia? That deal inflicted its most recent casualty yesterday when the chief executive of BAE Systems departed early.

The hon. Gentleman ought to do more research. The MOD Saudi Arabian projects organisation—MODSAP—handled that deal on a Government-to-Government basis. The deal was not as he alleges. I shall address his point more broadly, because I believe that the al-Yamamah deal is partly responsible for the bizarre decision on DESO.

Would not a deal such as al-Yamamah still be dealt with by the MOD under the new arrangements? Government-to-Government deals would still be the provenance of the MOD and separate from company-to-Government deals, which would be dealt with by the Department for Business, Enterprise and Regulatory Reform.

I hope that the right hon. Gentleman is right. We are talking about Government-to-Government deals, which were not part of DESO’s remit and will not be part of what we are led to believe will follow DESO.

If my hon. Friend will allow me, I will give way to him once I have completed my point.

Was that daft—I use that word carefully—decision taken, as my hon. Friend the Member for Mid-Sussex (Mr. Soames) claimed last week, as

“an act of bovine stupidity, engineered by some communist woman at the Treasury”?—[Official Report, 9 October 2007; Vol. 464, c. 223.]

We need an answer from the Minister. Was the decision made to appease to some faction within the Labour party? In answer to the point made by the right hon. Member for Warley (Mr. Spellar), I wonder whether it was a classic piece of new Labour spin. Did the Government perceive a problem with the BAE Systems al-Yamamah deal, and did they wish to park it? Getting rid of DESO means that they can say to the Liberal Democrats, or any organisation with which they may wish to make deals, that they have dealt with the issue. It does not matter that DESO was not part of the deal or that the issue was not about DESO. The decision is hugely damaging and wrong, but the Government have taken it.

The hon. Gentleman has made the point that I wished to make a few moments ago. Surely this is a classic piece of horse trading and gesture politics. The Government are on the back foot, as their own left wing and the Liberal Democrats are baying about the dropping of the BAE Systems case. The decision is a sop—a piece of red meat thrown to the lions, irrespective of the merits of the case.

My hon. Friend who, like my hon. Friend the Member for Mid-Sussex, has great experience in these matters, is absolutely right. To mangle an analogy, the decision is like using a sledgehammer to miss a nut.

Sustaining a capable and flourishing UK defence industry base, as my hon. Friend the Member for Reigate (Mr. Blunt) said, offers the UK a strategic advantage. It allows us to depend on quality, home-grown procurement for our defence needs. It helps keep down the cost of UK defence procurement by creating competition between domestic and overseas suppliers and generating economies of scale. It also helps to co-ordinate directly our armed forces’ urgent operational requirements in the field, which feed through into our defence exports. I am talking about real operational experience from our armed forces. Keeping that operation in the MOD strengthens relationships, with positive consequences for both military and foreign security policy objectives. The Government ignore that point at their peril. It is not I who has thought this argument up. It is all there in the Government’s defence industrial strategy 2005, which states:

“A strong defence industrial base is important for the UK’s defence.”

I ask hon. Members to consider for the moment a small African country—Botswana, let us say. Some people in the House believe that it is entirely wrong that a poor country such as Botswana should spend money on arms, but it has a right to defend itself. It has a right to have a small number of armed forces, and it may wish to take part in African Union missions to places such as Darfur. Where should Botswana go? Its first port of call should be the country with which it has a relationship—Britain. In the circumstances, I foresee that Botswana will believe that there is no value, no relationship, no future in coming to a country such as Britain, and it will receive a very welcome invitation from countries such as China, Russia or Israel. Many of those countries have very different attitudes towards arms sales from us.

The value of the export support team in our missions around the world is evidenced by the letter that has come into a number of hon. Members’ hands from Helen Liddell, the high commissioner to Australia, who eloquently sets out her experience in a mission of the value of such organisations and the way in which a country such as Australia buys into a relationship. She explains how a small manufacturer in any of our constituencies can go to Australia, go straight to the post, talk to the DESO representative—the first secretary—to understand how to do business with the Australian Government. It is vital to maintain that link, which operates through the military attaché network as well. I therefore hope that the Minister shares with the House the reaction of the key players to the Prime Minister’s decision.

We understand that two Ministers—Lord Jones and Lord Drayson—are very keen to make whatever comes out of this mess work. I pay tribute to them—I shall pay tribute, too, to the Minister for Employment Relations and Postal Affairs if he is prepared to give us that assurance—but things have not started very well. There are reports in the trade press that Lord Jones has described the Prime Minister’s decision as “bonkers”. Lord Drayson is alleged to have said, in the hearing of many officials, journalists and others at the farewell party for the director of DESO, Alan Garwood, that the Prime Minister’s decision was a great mistake. Such candour is to be admired. I hope that we hear more of it, and that it manifests itself in a genuine desire to sort out this mess.

Was the Secretary of State for Defence involved in the decision? If so, when did he learn of the Prime Minister’s tortured thinking? What is the involvement of the mysterious Baroness Vadera? I assume that she is the person to whom my hon. Friend the Member for Mid-Sussex referred last week. We are told that she has enormous influence over the Prime Minister and I think that the House deserves to know what her involvement in the matter is. What about the defence industry? We have heard from BAE Systems, Thales and others organisations. How many other companies have written to the Prime Minister, to the Minister or to others to complain? How many small companies in our constituencies have complained to the Government about the decision? The decision is much more important for them than it is for larger companies, which have large marketing departments and have experience all over the world. It is the smaller companies that account for a large percentage of the several hundred thousand employees affected—the people who need the support most.

What about the unions? What issues have they raised with Ministers? I said earlier that a number of them have not yet had the discussions with Government required under civil service rules. How many ambassadors and high commissioners were as bemused as Helen Liddell was in her letter? How many of them have contacted the Government? With open and accountable government, these matters should be put before the House. It is simply not good enough for the Minister to come here today and pretend—and I hope he will not do so—that he did not expect to be asked these questions. His civil servants will have told him what was said in the House last week. He will know that internal memos, minutes and documents relating to the matter are flying around Westminster and Whitehall like confetti.

I am grateful to those hon. Members who could not attend this debate or, indeed, last week’s debate on defence procurement for providing me with a wealth of material from constituents and others closely involved with DESO. A great many people, with varying degrees of involvement, are so disgusted with the Government’s behaviour that there is no shortage of information on just what has been going on inside this dysfunctional Government. If we do not receive answers today, this matter will run and run and become a festering sore for the Government. I have already drafted a raft of written questions, and I shall table them formally after our debate if the House does not receive the answers that it deserves. The Freedom of Information Act 2000 offers tempting avenues if approach fails. I hope that the Select Committee on Defence, on its return from an overseas trip, will set in train a detailed investigation into the matter.

I hope that the Minister will not insult our intelligence by claiming that the decision will strengthen UKTI and put this vital area of economic and strategic importance on a better footing. I hope that he will not make the fatuous claim that it will somehow remove the clutter of another department from the MOD. DESO was one of the great success stories, precisely because it was part of the MOD as well as being at arm’s length from operational matters. We may attack the decision and the way in which it has been taken, but we must obtain answers for the future. What arrangements exist in UKTI to undertake the work currently being carried out by DESO? I am sure that Lords Drayson and Jones want to make the best of it, but a rumour is going round among colleagues in the know that whatever emerges in UKTI may have the politically correct title of “Defence Services Research Group.” I urge the Minister to tell us that that is not so, because it sounds like some quasi-intelligence organisation, and customers will not want to touch it with a bargepole. Most of all, the industry wants to know if support for defence exports will remain part of the MOD’s remit. I hope that the Minister will not pretend that the process was a well thought-through, strategic change to the machinery of government. It was a ham-fisted and poorly thought-through decimation of four decades of success.

Thank you for allowing me to speak, Sir Nicholas. I did not intend to speak, but the hon. Member for Newbury (Mr. Benyon) has provoked me to make certain comments.

There is a strong case for withdrawing Government financial support from the Defence Export Services Organisation. We are dealing with an internationalised arms industry. DESO was set up by the then Defence Secretary Denis Healey in 1966; it was then called the Defence Sales Organisation. There was at that time an identifiable UK arms industry, which existed primarily to supply the UK’s own armed forces, and a UK arms export would then have been relatively easy to identify and define. Today, there is no identifiable UK arms industry. Military industry is internationalised, with most equipment containing components and sub-systems from a variety of companies. The companies may have their headquarters in one country, but subsidiaries in several others.

May I put it to my hon. Friend that the British defence industry is very identifiable by the tens of thousands of skilled British workers who are working in British factories throughout the country and often at the cutting edge of technology, which is an important driver in maintaining Britain’s manufacturing base? I think that they could identify the defence industry quite well.

That is not the point that I am making. In an earlier intervention, I made the point that one job in 500 in the UK economy is linked to the British defence industry. I shall try to make my point in a different way. BAE Systems illustrates the trend. It sells more to the US Department of Defence than it does to the UK Ministry of Defence. Most of its shares are held outside the UK, and barely one quarter of its work force is employed in the UK. It would already be a US company had it been able to persuade one of the massive US companies to buy it. BAE Systems and the other major arms companies exist, of course, to maximise profits for their international shareholders and they have little or no commitment to the UK and UK defence.

Astonishingly, DESO has responded to that internationalising trend not by being more selective about which exports it supports but by broadening its assistance. In 2005, Alan Garwood, the head of DESO, was asked what determined whether his organisation would consider a particular export a UK one and thus entitled to DESO support. His reply is lengthy, although I shall shorten it, but it illustrates that the definition of an export worthy of DESO support, and by implication the UK Government’s and taxpayers’ support, is both wide and unclear.

I congratulate the hon. Gentleman, who did not intend to make a speech, on having such an extensive script from which to read. His general theme seems to be that DESO—or should I say the British defence industry, which is formally represented in DESO’s activities—is not worth all that much to the British economy. Does he accept that it is worth some £5 billion a year, and does that figure not strike a chord in his memory as being exactly the size of the present Prime Minister’s raid on pension funds when he was Chancellor of the Exchequer?

The figure that the hon. Gentleman quotes may or may not be correct. I do not think that what amount the former Chancellor took from pension funds is a subject for this debate.

When asked that question, Alan Garwood said:

“The broad test for assessing DESO support to a UK-based defence exporter is not company ownership but the added value that the export would bring to the UK defence industrial base. When assessing competing bids, including situations where one of the suppliers may be foreign-owned, employment, the quality of the work, and the transfer of technology to the UK will be key influences.”

Swedish fighter aircraft have received DESO support, as they

“use some UK-manufactured components”,

and exports by the UK subsidiary of the US-based Lockheed Martin might also qualify under that definition.

Military exports are not unique in raising questions about the appropriateness of UK Government support for a multinational commercial enterprise. As the hon. Member for Newbury mentioned, the Export Credits Guarantee Department is holding a consultation on foreign content in which it proposes to address the problem with a formula based on percentage terms. In contrast to the ECGD’s approach, DESO’s UK test seems noticeably vague. It is unclear how it was developed, and the test is open to subjective decisions by DESO, which—particularly if there are competing bids—is left susceptible to lobbying.

I turn to second-hand sales. A major part of DSO’s work was to sell surplus UK armed forces equipment, thus making a return to the Ministry of Defence. However, two and a half years ago, the Disposal Services Agency, which is responsible for that work, moved from DESO to become part of the Defence Logistics Organisation, so the need to recoup MOD costs is no longer a reason for continuing Government support for DESO.

Should a private industry receive public subsidy? DESO co-ordinates most of the direct Government support for arms exports, provides marketing assistance and advice on negotiation and financing arrangements and organises exhibitions and promotional tours. The hon. Gentleman is quite right—the budget for operating costs is a relatively limited one, at £15 million or so during the last financial year.

As well as DESO’s assistance, the arms companies value the position DESO gives them at the heart of government. The head of DESO is always seconded from an arms company. DESO can argue a company’s case against other Departments and, through its explicit role of lobbying Ministers, is likely to distort policy making.

In order to understand my hon. Friend’s argument fully, may I ask a simple question? Does he think that the United Kingdom should be exporting defence equipment or not?

I am quite happy for defence equipment to be exported by the UK defence industry. It has an appropriate part to play in countries around the world. There are some examples of exports going to regimes that should not be receiving UK arms by that or other means, but in general I am happy. With parts of it, I am not. I hope that that answers my right hon. Friend’s question.

Military exports undoubtedly bring commercial benefit to UK-based companies—I acknowledge that—but it is not the same as benefiting the UK economy as a whole. Taxpayers should not be in the business of subsidising private companies to help them boost their profits and share prices.

I am grateful to the hon. Gentleman for reading out his brief from the Campaign Against Arms Trade. Perhaps he has not been briefed on this, but does he not accept that defence exports enable British industry to achieve economies of scale that reduce the unit cost of British defence equipment to the United Kingdom Government? In other words, defence exports result in direct benefit and cost reduction to the Government.

That is an interesting hypothesis, but it is not necessarily borne out by the facts. I do not think that that suggestion is true in practice.

What would happen if the arms trade to certain regimes were scaled down? The many millions invested in that industry could be invested in others, such as renewable energy and transport, creating new and highly skilled jobs.

I understand the hon. Gentleman’s feeling about the arms trade, and I respect it. It is interesting that he is here today to speak on the abolition of DESO. I have not yet seen either an early-day motion or an Adjournment debate in his name about the abolition—it happened almost without a press release—of the Defence Diversification Agency, whose job was to diversify the defence industry into the UK market. It is contradictory for him to come here and not mention that. It is part of the same issue that he has raised today.

That is a fair point. When I get back to my desk, I shall look to see whether there has been an omission or oversight leading to the lack of an early-day motion to that effect, but I am not sure whether the hon. Gentleman’s point is accurate.

The existence of DESO places the reputation of the Government and the UK at risk. Military industry ranks alongside construction as the world’s most corrupt sector. DESO’s close ties with and public support for military companies risks tainting the Government with allegations of corruption. There is quite a long track record of it. Back in the late ’60s and early ’70s, DSO officials turned a blind eye to corruption in UK arms sales to Saudi Arabia. More recently, before the al-Yamamah probe was dropped, the Serious Fraud Office interviewed Alan Garwood under caution. It is understood to have asked him whether DESO knew if payments made to Saudi officials continued after 2001, when the law was changed to make payments illegal that could be construed as bribes. I refute the point made in an intervention that DSO had no involvement in the al-Yamamah deal. It might have been a Government-to-Government deal, but DSO provided advice, support and consultation. Its fingerprints are all over that unfortunate deal.

Why does my hon. Friend describe as unfortunate a deal that kept tens of thousands of skilled British workers in employment at the cutting edge of the technology industry, particularly in the north-west? What does that say to workers in the north-west?

When I described it as unfortunate, I was referring to the circumstances—the financial arrangements and the covert organisation that existed to push substantial sums into hidden pockets in Saudi Arabia and elsewhere. That is what is unfortunate—not the deal, the arms or the country receiving them but the arrangements surrounding the deal. I am sure that my right hon. Friend will want to contribute to the debate later, having worked as a Minister with some distinction in the relevant Department earlier in our Government’s time in office.

I wish to make two further brief points. Military exports are often justified as a way of ensuring continuity of production, so that the UK’s armed forces can be supplied whenever necessary. However, exports can take precedence. For example, the first 24 Eurofighters for Saudi Arabia will be taken from those that were originally destined for the RAF. That is hardly continuity in supply for the UK’s armed forces.

Finally, one reason given for wanting the continuation of DESO—we shall see what happens after its demise—is that public support for military exports is based on defence diplomacy. However, the Saudi Arabia saga exposed the lunacy and fallacy of that argument. For all the Government’s desire to expand our influence around the world, the dropping of the SFO inquiry—perhaps the Minister will incorporate an answer to this point in his reply—shows clearly that the real power lies with the customer Governments and the supply companies. The interests of the Government and the taxpayer come a very poor third and fourth in that equation.

Although I respect the motives of the hon. Member for Newbury in wanting to debate the subject—I congratulate him on its timeliness and on his speech—the activities of DESO, its style and its involvement in numerous dodgy deals over many years mean that it is at last being consigned to the wastepaper basket of the defence industry. That is where it deserves to be. The UK defence industry will continue to thrive and expand, it will continue to provide jobs and advance technology, and it will continue to be a British influence around the world. It does not need DESO. DESO is a barrier to that; it is a brake, not an accelerator or a catalyst. DESO is going, and good riddance to it.

It is a pleasure, Sir Nicholas, to be under your chairmanship for a debate on defence, as no one has done more over the years to support the defence industry and our armed forces. I am pleased to contribute to the debate. It was initiated by my hon. Friend the Member for Newbury (Mr. Benyon), who rightly pounced on the matter as being of the first importance to our national life.

As far as I know, I have never seen the Minister before in my life. I understand from “Dod’s” that he was the last Prime Minister’s political secretary. Of one thing we can be sure: the last Prime Minister would not have behaved in this way about DESO—as the Minister will know. I put it on record that there can be no more inappropriate person to answer this debate than a Minister for Employment Relations and Postal Affairs. It is a farce that, on such a matter, the Government could put up a Minister who has had absolutely no interest in or responsibility for any of the decisions that we are debating today. I hope that the official channels will note that fact, as it deserves broader and wider recognition in the House.

As my hon. Friend pointed out so well, the DESO decision was not a well thought out strategic change to the machinery of government. It was, as he said, a ham-fisted and poorly thought out decimation of four decades of outstanding success and service to UK Ltd. It was not only a bad decision, it was a rotten decision. It was taken to appease a number of factions. I understand it was done to appease a communist who works in the Treasury, and it was done in a thoroughly underhand and low way.

I understand that only nine days after the appearance of an advertisement in The Sunday Times for a new head of DESO, the permanent under-secretary at the Ministry of Defence was summoned to No. 10 to be told that DESO was to be closed. The permanent under-secretary then informed Sir Alan Garwood, the head of DESO, who informed his staff the next day. There was no consultation. Not even Sir John Rose, the chief executive of Rolls-Royce, or Mike Turner, the admirable chief executive of British Aerospace, were informed that the change was about to take place, let alone consulted about it. That is in keeping with the present Prime Minister. Indeed, it is my strong belief that the Secretary of State for Defence was not told. As you may know, Sir Nicholas, the Secretary of State was not even told that the Prime Minister was to make an announcement in Iraq about the return of 1,000 men, most of whom were already here.

As I said, the change was dressed up as an improvement to the machinery of government. If one can believe it, that change included a Government proposal to undergo a major reorganisation of the head office of the Ministry of Defence—which is to proceed at exactly the same time as they are prosecuting a war on two fronts. It is hardly surprising that parts of the Government should be held up to ridicule and contempt if they take their eye off the ball in order to reorganise head office at the same time as their men are fighting on two separate fronts. It is, indeed, an astonishing decision. It is living proof that this Government are not competent, open or accountable.

I ask the Minister to answer these questions today. Was the Secretary of State told before the decision was taken? Was he consulted in any way? Was Lord Drayson, Minister for Defence Equipment and Support, consulted? I want answers to those questions before the Minister finishes replying to the debate.

The point of DESO is this: it is an extremely efficient, effective and vigorous promoter of its operations, quite unlike the dud organisation into which it is to be broken up and shunted. I had the privilege, as did the right hon. Member for Warley (Mr. Spellar), who was a doughty defender of defence interests, to be Minister of State for the Armed Forces and to work alongside one of the great heads of DESO, Sir Charles Masefield. He was a truly remarkable man. His energy, commitment and effort, together with that of DESO, secured major international successes and commercial contracts for British companies of all sizes.

I strongly commend the words of my hon. Friend on the vital importance of the holistic approach that DESO took to the defence industry; it dealt not only with the great companies but with the small businesses struggling to make their way in overseas defence markets. I have the greatest admiration for DESO, especially for its success overseas in the interests of our country. It is one of the most effective organisations for the expansion of British commercial interests overseas.

DESO linked extremely well and very effectively with our embassies and attachés, and it had unrivalled knowledge of its markets—something that UKTI could not even begin to achieve. It took a seamless approach; everyone knew what DESO was doing. The staff of DESO attached to our embassies and high commissions were extremely good at developing those vital markets. The Government are quite unclear about whether the staff will be retained.

As I said, the decision was taken in order to appease a number of factions in the Labour party. One has to assume that those who initiated the decision are working for another power. They cannot be working in the interests of the United Kingdom. They appear to be determined, for that is what they will do, to undermine the commercial efforts of Britain in some of the most competitive and important markets for our commercial endeavour overseas.

I believe that the Select Committee on Defence should examine that grotesque decision, taking evidence from all the parties involved on how it came about, who was responsible, who initiated it and what were the thoughts behind it. Clearly, no strategic thought was given to the change. It is a terrible, dud decision, and my hon. Friends and I will continue, through parliamentary questions, debate and with freedom of information, to get to the bottom of the matter. We have little hope of hearing anything useful from the Minister. However, if he intends to remain an honourable member of the Government—I am sure that he is—he must answer openly and make the Government accountable for that decision, and tell us today how it came about, who took it, and what he believes the consequences to be.

I cannot believe that the Government can do such a stupid thing. DESO has been a great success for this country. As I said in the House last week, wilfully to undermine it, break it up and take it out of the Ministry of Defence, which has the back-up and the people to know what it is doing, and where it is linked into our defence diplomacy and export efforts, is a decision of bovine stupidity.

When you introduced the debate, Sir Nicholas, you said, quite understandably, that this is one of a series of debates on defence that have rightly been occupying the House’s attention in recent days. If only that were true. It would have been true had the debate been held a few months ago, but as we can see from the Government’s representation here today, the Government do not regard the debate as one about defence at all. The Minister answering for them is not a Minister for defence, but for the Department whose title, I believe, is the Department for Business, Enterprise and Regulatory Reform, or DBERR for short. As I would understand it from any lexicon, the word “deburr” would mean something like “to take the rough edges off something”, which I am sure is what the Government have been trying to do by making this meretricious and indefensible move.

The significant aspect of the debate is not so much the difference between the opinion of every Opposition speaker, on the one hand, and on the other hand that of the Government and of the one speaker from the Labour Back Benches who so far has defended their move. What is significant is the debate that took place in a series of interventions on that one speaker, the hon. Member for Wolverhampton, South-East, by his right hon. Friend the Member for Warley (Mr. Spellar), who was a distinguished junior Defence Minister at the time when the Government were producing sensible documents such as the strategic defence review.

The hon. Gentleman might wish to correct his references to hon. Members. I am happy to defend all my own comments, but I am the Member for Wolverhampton, South-East. I believe that the hon. Gentleman was actually referring to my hon. Friend the Member for North-West Leicestershire (David Taylor).

I am happy to acknowledge that error, and I only hope that that will not be the sum total of misapprehensions on which the Minister is able to correct this side of the House. His hon. Friend the Member for North-West Leicestershire (David Taylor) and his right hon. Friend the Member for Warley have between them absolutely encapsulated the reason for the change. Had DESO remained with the Ministry of Defence, we would not have seen the sort of concern and outrage that has resulted from what is purely a political gesture. As my hon. Friend the Member for Newbury (Mr. Benyon) said in his excellent opening speech, and as numbers of hon. Members have said since, that gesture is clearly meant to appease those people who object to the Serious Fraud Office having dropped the BAE Systems inquiry.

My hon. Friend really knows his stuff in this area and was a very distinguished shadow Minister. Is he aware that the head of DESO once told me that the former Prime Minister, the former Member for Sedgefield, was absolutely assiduous in helping the cause of British defence exports throughout his time in office, and was always prepared to help DESO in its overseas work in the greater interests of the United Kingdom’s commercial success?

I can well believe that. Indeed, given that very commitment by the Prime Minister’s predecessor, the whole strategy of the present incumbent in seeking to distance himself from what he no doubt regards as the tainted legacy of his predecessor adds to an understanding of the reasoning behind the decision. One might think that the Government would be rather discomforted by the fact that, so far, only a single Member of the Labour Back Benches has spoken up for their decision, whereas every other speaker—not least my hon. Friend and former boss as shadow Secretary of State for Defence, the hon. Member for Mid-Sussex (Mr. Soames)—has excoriated it. It would be a mistake to think so, however. I am quite sure that every speech that points out the unjustifiable, indefensible and outrageous nature of this decision—both in its own right and in its execution—will enable the Government spin doctors to point to the Government’s critics and say, “You see, we have delivered. We have upset and outraged all those people whom you oppose because they believe in a strong defence industry and in strong defence exports.”

I am most grateful to the hon. Gentleman for spelling out in his own terms the importance of the arms industry. Does he believe that the shock departure of the chief executive of BAE Systems yesterday was linked to the al-Yamamah deal, to which he referred earlier, or might it have been linked to other corruption inquiries in relation to the arms trade that involve BAE in South Africa, Tanzania, Chile and the Czech Republic?

I would be astonished if there were such a link, and there is something that I have not quite understood, either from the tenor of the hon. Gentleman’s speech or from his interventions. Either he accepts that there is a role for a legitimate arms industry for export from this country, or he does not. He indicates that he does. We must therefore question the entire relevance of his speech—one that sought to minimise the importance of the industry—to the Government’s decision to move an efficient Government agency from the Ministry where it is most appropriately sited to a different one, where there is no experience and where effectively the Government will be starting from scratch in the representation of such an important industry.

I am not being party political when I say that it is emblematic of what has occurred that the Liberal Democrat party has not seen fit to send a Back Bencher, let alone a Front-Bench spokesman, to take part in the debate. No party would have been more in the vanguard of opposing the arms trade and calling for changes of this sort than the Liberal Democrats. However, they have got what they want, and they are now involved in their favourite spectator sport—from our point of view—of engaging in another round of leadership elections. Those elections are not due until some time near the end of the year. Are we therefore to expect a merciful release from Liberal Democrat contributions to all our debates between now and the end of the year, or is it simply that they are leaving this debate alone because they know that their objectives have been achieved in relation to arms exports and defence representation?

The point has been made repeatedly about the advertising of the post to head DESO only days before the announcement of DESO’s abolition. Yet this is the Government who entered office talking about joined-up Government. What we must remember is that, if the Government are dissatisfied with the uses to which exported arms may be put, it lies in their hands to lay down rules and regulations on countries to which arms are exported. As it is, we are seeing a sort of reversion to old style unilateralism. By emasculating the organisation, the Government are now saying, effectively, “Let’s leave it to other countries—countries that have more ethical foreign policies than us, such as France, the USA, China and, of course, such as our old friends the Russians.” Vladimir Putin has been pictured shaking hands with President Ahmadinejad of Iran on the front pages of today’s newspapers.

I believe that what has happened today is a gesture to certain parts of the old Labour constituency, and our reaction is enabling the Government to say, “You see, our gesture means something because you have upset the forces of darkness.” But they are not the forces of darkness, they are the forces that enable £5 billion a year of revenue to flow into this country’s economy and that are rightly regulated by the Government, who decide where arms exports can go. It is a sign that the habits, practices and indulgences of manipulation, spin and devious techniques did not die with the passing of Tony Blair as Prime Minister.

I think that it is in order for me to declare that in my previous employment I worked for QinetiQ, which at that stage was the Government defence research authority. Indeed, I therefore have some shareholdings in defence companies, although they are too small to warrant an entry in the register.

Would the hon. Gentleman confirm that QinetiQ was the company that was privatised and sold off in the most dubious fashion, which resulted in substantial profits for some of the key people in the know at the head of the organisation?

I totally agree. I opposed the sell-off of QinetiQ, and I do not have any shares now—nor did I have any then—in the company. I do not believe that those massive pay-offs were worth it—no one warrants that. I agree with the hon. Gentleman on that point.

We all call it “arms” today, because it suits the Campaign Against Arms Trade to do so, but the British defence and aerospace industry goes much wider than arms. We do not make Kalashnikovs and all those things that we mainly see on the television. As a north-west MP, I am incredibly conscious of the weight and contribution that the defence industry gives to the UK economy. We make a whole range of things that, in today’s environment, mainly have dual uses. That is important.

My hon. Friend the Member for Newbury (Mr. Benyon) correctly pointed out that one of the reasons that we have an arms industry in this country is to spread the cost and to allow our armed forces to afford the best kit available. If we did not share the cost of those procurement cycles, we might not be able to afford them. That means sharing and selling to our allies. No one here says that we should sell weapons systems, or even defence systems, to our enemies or to people with whom we disagree.

The hon. Member for North-West Leicestershire (David Taylor) pointed out that BAE Systems sells more to America than to Britain. Well, that is not a surprise, as America is our biggest ally and also the biggest defence market in the world—shock, horror! People may have views about the Bush regime, but let us remember that it is not a regime—he is an elected President, and one with whom the hon. Gentleman’s Government went to war in Iraq. America is a perfectly acceptable ally for us today, in the past and in the future. I am very happy if British companies share their technology with American companies and American armed forces benefit from the protection that our defence industry can give them and vice versa. The Government have just placed an order for Mastiff vehicles to protect British armed forces in Iraq and Afghanistan from mines. That is an American company selling to Britain. I hope that no one objects to that, and nor should they.

The industry also allows us to keep a skills base. When I worked at QinetiQ, it employed 10,000 people across the United Kingdom. It was the biggest grouping of PhDs in Europe, and the biggest research technology organisation in Europe. In this day and age, when we are threatened by Chinese and Indian competition in the realm of technology development, to have an organisation such as QinetiQ, founded in the defence and aerospace industry, is a real asset to the UK. Before we push away what it does because it is founded on defence, we should think what such companies have contributed for our daily use. As I stand in this Chamber, I can see plasma screens, a QinetiQ invention that people daily queue up to buy from Currys or wherever else. The timing clock is a military LED invention. When I get e-mails from all those people in the Campaign Against Arms Trade, I like to remind them that the internet was invented by the Department of Defence in the United States—how nice that they can send e-mails, based on a military system. Perhaps that is why the Minister responsible for postal services is here—so that he can offer an ethical alternative for sending communications.

We should remember that the arms industry—the defence industry—gave us the jet engine and facilitates everything that we do today. People cannot merely say, “If we get rid of our arms trade, that will be fine.” Spin-off from the aerospace industry benefits United Kingdom citizens, the taxpayer and the Treasury. I find it totally ironic that the new Prime Minister is at the heart of the decision to abolish the Defence Export Services Organisation—the man who has always played to the chorus of Rosyth. I am an ex-MSP who represents a north-western English constituency, and my father is from Fife—in fact, he grew up in the Prime Minister’s town when the Prime Minister was the son of the manse, which anyone from Scotland knows is a far higher class than most people in Scottish society. This is the man who makes capital out of backing Rosyth and lives next to Raytheon in Glenrothes. In he comes, and to give some sop or make some easy decision, he abolishes DESO. I hope that the voters in Fife remember that that is what their Prime Minister has done. They did in the other seat in Dunfermline, which became, rather ironically, a Liberal Democrat gain. The Scots know a good thing when they see it, and I hope that they remember what the Prime Minister has done with DESO.

We should also remember about dual use technology. Yes, we have invented things, but today’s threat is not the Soviet Union—it could well be Russia or China in a few decades, but it is not now—but the terrorists on our street. When I was in QinetiQ, I personally worked on projects that are right now keeping us safe from suicide bombers. Most of what we do in defence today is about scanners, sensors and communications. It is not about firing the gun but about trying to anticipate the actions of our threats. As we speak, in this building, some—probably 99.9 per cent.—of the sensors that are being used were developed by the arms industry. Let us call it the arms industry, because we can take these people head on. Those sensors, developed in that industry, keep us safe in aeroplanes and on the streets.

Smiths Group is an excellent company that is now equipping every single New York tube station with chemical and biological detectors to ensure that the population of New York is protected from weapons of mass destruction used by terrorists. If only our Mayor of London were clever enough to invest in such a system. That is a British invention, and I am proud that we supported it. We did so through DESO, which got those sales for us—something it is extremely good at. In my experience, I would go to an embassy, and DESO would know what it wanted. It would know the market and the customer. Let us remember that DESO was on the side of small business. It was not BAE Systems. Yes, it helped BAE Systems and everything else, but it also helped small companies in my constituency and in that of my hon. Friend the Member for Newbury by giving them the marketing infrastructure and international presence that they would not otherwise have had. Frankly, without that they would have been crushed by the likes of the American, German and French giants. If people are on the side of British defence, they should be on the side of DESO.

My hon. Friend the Member for Mid-Sussex (Mr. Soames) is absolutely right when he talks about the Department of Trade and Industry being a dud—we call it “deter trade international”. We used to go to the embassy, but we were lucky if the staff knew anything from their elbows, and when they did sort of know what was going on, their only response was, “Ring up your Business Link in your regional development agency.” That is the real game—keeping each other going: the RDAs keep the DTI going, and the DTI keeps the RDAs going. I spoke to a woman on the desk at Southampton—I wonder if she was the same communist who now has got a job in the Treasury—who did not even know where the Czech Republic was when I asked if she could help with a tender in that country.

We should be reversing this decision. It is an horrendous decision for a small, £16 million project. Not much in the Government works extremely well for £16 million, but DESO does. We should all recognise that not a single MOD Minister, nor probably a single DTI Minister—for its short remaining life span—supports this decision. However, the Prime Minister is at the heart of this. He can reverse the decision, and he must.

I am delighted to respond in this debate on behalf of the Opposition. I congratulate my hon. Friend the Member for Newbury (Mr. Benyon) on securing this very important debate, which will be widely read across the land and where the defence industry is represented. I am proud to be the Member of Parliament representing the headquarters of BAE Systems and QinetiQ—two of Britain’s greatest defence companies. I make no apologies.

I am replying to this debate because I am a shadow Defence Minister, and I think that it is a mark of the contempt with which the Prime Minister and the Government hold the defence industry in our country that they have put up today a Minister representing postal services. I have never met him—it is not his fault, and I dare say it is mine—but I have read through his experience, and he seems to have none of the defence industry. It is contemptible that he has been put forward to respond to this debate. The truth is that Defence Ministers are consumed with embarrassment about a decision on which the Secretary of State for Defence was not consulted, let alone his junior Ministers. They have managed to shuffle off the responsibility on to the poor, hapless Minister here today.

As my hon. Friends have explained so graphically, the truth is that this was not planned. In July of this year, an advertisement in The Sunday Times invited people to apply for the job of head of the Defence Export Services Organisation. This is how the Government described the appointment:

“This is a vital role supporting defence objectives and contributing to wider national interests. It is a highly significant appointment”.

It was so significant that 10 days later the Prime Minister scrapped the whole organisation, so obviously no one new was appointed to run it.

When I asked whether anyone in the industry had been consulted, eventually I received a reply from the Secretary of State for Defence, who said:

“This was a Machinery of Government change and in such circumstances, it is not unusual for announcements to be made quickly and without prior discussion with those outside Government. However, the current and future Chairs”—

which I assume means chairmen—

“of the National Defence Industries Council, Sir John Rose and Mr Mike Turner, were informed by telephone that morning.”—[Official Report, 17 September 2007; Vol. 463, c. 2173W.]

What contempt! Those captains of British industry, who are working their guts out for their employees and their country and for the defence of the realm, were informed by telephone that morning. Indeed, they were informed only after Alan Garwood had been, at half-past 9 in the morning—and he is only the bloke running the system! It is perfectly clear that there was no consultation.

My hon. Friends have asked for some answers from the Minister, and I have some questions of my own. It is his duty to answer those questions, although I doubt that he will be able to do so. The good news that I can tell my hon. Friends is that, according to the Campaign Against Arms Trade, whose brief was most ably read out by the hon. Member for North-West Leicestershire (David Taylor):

“There will be more about how the campaign was won in the next CAATnews.”

We will look forward to receiving information on how that decision came about, probably not from the Minister, but from the Campaign Against Arms Trade. That is highly appropriate, because my hon. Friend the Member for New Forest, East (Dr. Lewis) made it clear that this was a sop to the old left of the Labour party and those who were upset by the calling off of the Serious Fraud Office investigation.

It is clear that some Labour Members have it in for the defence industry, and the hon. Member for North-West Leicestershire demonstrated his complete, abject lack of understanding of Britain’s defence industry and its importance to constituencies across the land. He ought to understand the anger of his party colleague, the right hon. Member for Warley (Mr. Spellar) at his display of such ignorance in front of a man who, of course, was a Defence Minister, was probably instrumental in shaping the strategic defence review in 1998, and continues to make an important contribution to defence matters in our country.

The hon. Member for North-West Leicestershire was inveighing against the cost of DESO. In one year, it costs about £15 million net, but produces returns of £5 billion in sales for our country.

I am sorry, but I do not want to hear any more from the Campaign Against Arms Trade.

My hon. Friend the Member for Reigate ( Mr. Blunt) pointed out that DESO contains specialist services and expert knowledge, and of course people in uniform, because overseas Administrations are not organised in the same way as the United Kingdom. Many of them want to come to the United Kingdom and speak to military personnel, in a military environment, and talk to military Ministers in the Ministry of Defence. By this break-up, the Government are proposing to remove that special experience. As my hon. Friend the Member for Newbury said, all the able people will be making tracks to the front door, if they have not done so already.

As the right hon. Member for Warley pointed out, Government-to-Government deals will remain the responsibility of the MOD. My hon. Friend said that information had been circulated to some of us from people who are desperately concerned. The Minister does not understand. I assure him that this is no synthetic anger. We are deeply angry about what the Government have done, and so is British industry.

In case the Minister does not know, the answer to the frequently asked question:

“What will happen in future with overseas customers who want to deal with the MOD, not a trade promotion organisation?”,

was:

“That is again something that will need to be worked through with the other Government departments concerned. As the Prime Minister's statement makes clear, current and planned arrangements, mainly with the Saudi Government, will continue.”

Everybody else will be subject to arrangements yet to be decided.

Interestingly enough, the Campaign Against Arms Trade is also saying that by shifting this into the Department of the Minister here today, the defence industry will be removed from the Ministry of Defence, which will leave it much more subject to policy decisions from the Foreign and Commonwealth Office and the Department for Business, Enterprise and Regulatory Reform. This decision will have a huge adverse impact. It is already having an adverse impact on the way in which defence business is done between the United Kingdom and potential overseas customers. Has the Minister attended the defence systems and equipment international exhibition at docklands? He should do so.

Clearly this is an act of political spite. It is a pay-off to Baroness Vadera, who got a peerage as well. We need to know which officials in the Ministry of Defence and the Treasury are either involved themselves in the Campaign Against Arms Trade or have family members who are involved. We also need to know what resources are going to be put into the new arrangement with UK Trade and Investment. What is the MOD’s commitment going to be? I understand that the Minister’s Department intends to set up an organisation within the DTI with military officers seconded to it. Is that the case? Have those military officers agreed? Where will they be located? Will they have access back into the MOD? What about small and medium-sized enterprises, which some of my hon. Friends have mentioned? I received an e-mail from a company that I know called Christy Military Flying Training Ltd, which is a DESO charter member. It had to qualify to become a charter member, which gives it instant credibility in the overseas market. It said:

“The removal of that Charter Member status will, at the very least, have an impact on our ability to break into overseas markets”.

It also said that

“being a DESO Charter member has been of significant benefit, giving us direct access to sales support overseas and overseas contacts via FCO.”

SMEs will be wiped out of the picture. We know from a written answer published today that DESO branches—project offices—throughout the world number about 15. What will happen to them? We need an answer from the Minister.

This is a contemptible, personal decision by the Prime Minister, whose interest in defence does not venture beyond his own constituency, where Rosyth is located.

Hon. Members: Or a photo shoot in Iraq.

Indeed, my hon. Friends are right.

This decision is a sop to the left and a kick in the teeth for the United Kingdom’s most successful manufacturing industry. Some 21 per cent. of defence employment is linked to defence exports, I can tell the hon. Member for North-West Leicestershire. Ultimately, however, the real crime is that the decision is a gift to our competitors. Unless seriously satisfactory alternative arrangements are put in hand, we shall reverse this decision when we return to office, and we shall re-establish DESO.

I congratulate the hon. Member for Newbury (Mr. Benyon) on securing the debate. I appreciate his strong interest in defence issues and his background as a member of the armed forces. We also heard from a former shadow Secretary of State for Defence, the hon. Member for Mid-Sussex (Mr. Soames), and from others with a background in the issue. I assure them that I have full respect, as they would expect, for that experience. If that respect is not returned, that is a judgment not for me, but for Opposition Members.

The question was asked why a Minister from the Department for Business, Enterprise and Regulatory Reform is speaking in this debate. The answer is that the Prime Minister’s decision, which was announced on 25 July, was to transfer some of the Defence Export Service Organisation’s responsibilities to UK Trade and Investment, which has two parent Departments, one of which is DBERR, so in the future my Department will have a strong interest in this area.

I shall begin by endorsing the sentiments that have been expressed about the strength of DESO’s record, the quality of the people who work there and its success in securing many orders for the defence industry throughout the UK. Hon. Members asked several questions about the transfer, but at root there is one more fundamental question about whether in the transfer we will lose the record, expertise and quality that DESO has stood for over the years, or whether there will be an opportunity to add to it. The Government are of the view that the change does not mean losing that quality or that record but gives us an opportunity to add to it.

One point was made in the debate that I cannot endorse: that somehow UKTI is not a successful body for the UK, that it is not respected throughout the world and that it does not have expertise and value to add to the promotion of exports in general and of defence exports in the future. The question was asked about the announcement itself, and I am afraid that I must agree with the answer that the Opposition spokesperson, the hon. Member for Aldershot (Mr. Howarth), read out a moment ago. As the machinery of government changes, it is not unusual for such changes to be announced in that way, or for the implementation details to be worked out afterwards. It has happened in the past, and it may happen in the future.

It is now three months since the decision was taken, and customers want to know whether the Ministry of Defence will retain as part of its remit a responsibility for defence exports.

That responsibility passes to UKTI under the proposals. I can confirm to the hon. Gentleman that my colleagues, Lord Jones of Birmingham, Lord Drayson and others are engaged in intense discussions with industry representatives to make a success of the change. There is a shared desire to do so.

We do not make the change because we believe DESO is in any sense a failing or a bad organisation but because, despite its record of success and the quality of its people, we believe that value can be added by integrating defence exports efforts with the efforts of UKTI to promote exports throughout the world.

The Minister is being very gracious in giving way. He said that it was a machinery of government decision and that such decisions are routinely taken in that way, but are they routinely taken in that way without consulting the principals that the decision affects, as has clearly happened on this occasion?

I have given my answer to the machinery of government question. The Prime Minister is responsible for machinery of government decisions, and it is not without precedent for such decisions to be announced and for the implementation details to be worked through afterwards. That is what has happened in this case.

If hon. Members will bear with me, I should like to make some progress and perhaps provide them with some of the detail that they have asked for during the debate.

The new organisation will be integrated with UKTI. It will deliver services that are responsive to the needs of our overseas customer Governments in a way that coheres with UKTI’s strategy. The transfer will establish the new organisation as a UKTI business unit with expertise in defence services and products, but it will be managed and run like other UKTI business units.

The question was asked about what staff will work in the unit. I am happy to tell Members that it will contain a mix of civilian and military staff, and we recognise the point that was made about the importance of serving officers being part of the organisation. I hope that that answer clarifies the situation. We are trying to keep DESO’s value and record, and to increase the synergies between the defence industry and the wider manufacturing and service sectors within the UK. Many defence manufacturing companies manufacture more than solely defence goods, and at present they must draw on expertise that is spread widely across Government. That divide need no longer apply, and the same can be said of investment advice.

We recognise that there are specific features that are unique to the defence sector that must be accommodated in the new arrangements. The defence industrial strategy describes the part that defence exports play in ensuring that those sovereign operational capabilities, vital to our defence needs, are maintained within the UK. Defence exports can also play an important role in building bilateral relations with friends and allies throughout the world.

Several questions were asked, and people have read from briefing documents, about decisions that have yet to be taken. I shall be honest with Members: there are decisions that have yet to be taken. The plan is to develop an implementation plan, led by the Cabinet Office, by the end of the year, which will answer many of the questions that have been put today. Work has already begun on the transfer in order to ensure that it is done as seamlessly as possible. In managing its implementation, there is of course an important dialogue to be had with industry, to ensure that we understand the specific requirements and achieve the best possible result from the transfer. We will of course retain strong links with the MOD afterwards. We recognise that that is essential in order to ensure that the advice and assistance of the armed forces can continue to be used in support of defence products.

Sir Nicholas, I should like to continue, but perhaps time demands that I end there.

On a point of order, Sir Nicholas, given that the Minister has been unable to answer many of the questions put by me and my hon. Friends, will he give us an undertaking that he will write to us?