My right honourable friend the Secretary of State for Defence (Mr Des Browne) has made the following Written Ministerial Statement.

At a time when our Armed Forces are conducting operations around the world, it is important that the Ministry of Defence (department) seeks every opportunity to ensure that every pound of the taxpayer's money devoted to defence is used to best effect. I am therefore announcing a number of improvements to the way in which we use that money.

Subject to consultation with the trades unions, we propose to make a number of changes to the organisation and processes by which we manage defence. Together, these changes will lead to better delivery of support to our Armed Forces and the front line.

In December 2005, the department published the Defence Industrial Strategy (Cm 6697). The Defence Industrial Strategy set a challenge for both industry and the department. We are asking industry to work more effectively with us, and in a number of sectors, to restructure better to meet our needs. We are working closely with it to achieve this. Equally, the strategy calls on the department to make a step change in the manner in which it conducts the acquisition and management of military capability. In response, a senior official was appointed in January 2006 to conduct a review of current structures, organisation and processes to determine whether these support, encourage, hinder or obstruct the department's ability to deliver through-life capability management. The report, Enabling Acquisition Change, has now been presented to Ministers who, subject to consultation with the trades unions, have accepted its recommendations. A copy of the report has been placed in the Library of the House of Commons, and also can be viewed on the department's website.

The report stresses both the primacy of through-life considerations and that improving acquisition skills is critical to success. It recommends changes to the department's planning processes, including to the part played by the front-line commands, and the governance of acquisition. These changes are designed to facilitate through-life capability management and to make the department more agile against a background of rapid changes in the security environment and technology. The review also concluded that the department should build on the progress made by the Defence Procurement Agency and the Defence Logistics Organisation to work more closely together by merging them. This will remove a fundamental barrier to through-life capability management: the continued existence of two organisations with separate identities and cultures, one that procures military capability and the other that supports it.

The new organisation will take the best from each organisation and form a single entity responsible for the procurement, maintenance and sustainment of military capability, continuing to draw on the private sector where this will provide best value for money. Its fundamental ethos will be the delivery of equipment and logistics capability to the front line and for operations. The chiefs of the Defence Logistics Organisation and the Defence Procurement Agency will jointly be responsible for creating the new organisation by April 2007. Arrangements will be put in place to run the new organisation under a unified management structure over the following 12 months while the new organisation establishes itself. An open competition will be run to appoint, from April 2008, the head of the new organisation.

Implementation of the recommendations will represent a significant change programme for the department. Ministers and senior management are committed fully to taking it forward as swiftly as possible. However, throughout this period of change, delivering new capability and maintaining support to the front line will remain paramount.

Consistent with the decisions set out above and the commitments announced in the July 2004 White Paper Delivering Security in a Changing World: Future Capabilities, I have decided that steps should be taken, again subject to consultation, to collocate elements of the Defence Logistics Organisation with the Defence Procurement Agency in the Bristol/Bath area. This will be a key part of the programme of improving efficiency and effectiveness across the department in order better to support our Armed Forces. Collocation, which is estimated to produce savings of around £200 million over a 25-year period, will result in a reduction of 360 civilian posts. A further 100 military posts will be civilianised.

This decision involves the DLO withdrawing from a number of sites over the next five years. Initial withdrawals are planned from Andover South and Sapphire House, Telford, with subsequent withdrawals planned from RAF Brampton, Caversfield and Sherborne. The DLO will also draw down from RAF Wyton. A presence is planned to be retained at Andover North, from where the supply chain will be controlled.

I can also confirm that Andover is the preferred site option for the new Headquarters Land Forces which will be formed from the integration of Headquarters Land Command, currently based in Wilton, and the Adjutant-General's headquarters, currently based at Upavon. Subject to further work and final decisions next year, we envisage, from1 April 2009, Headquarters Land Forces will be fully operational at Andover. This will provide the Army with a contemporary, integrated and efficient headquarters of about 1,750 military and civilian staff. Compared to current headquarters staffing levels this represents a reduction of about 240 civilian and 100 military posts and we expect this to be accompanied by a significant reduction in running costs.

Separately, I have also approved, subject to consultation, proposals to relocate to RAF Wyton those staff at RAF Brampton not affected by DLO/DPA collocation. This will enable the disposal of the Brampton site, unless an alternative defence use can be found, with attendant reductions in the department's running costs. These changes will lead to a reduction of between 50 and 100 posts, mostly civilian contractors.

I recognise that these decisions affect a large number of the department's employees and their families. I would like to place on record the Government's appreciation of their hard work and dedication. The department will work to minimise the impact by providing all the help it can for those affected, and avoiding compulsory redundancies where possible.

The department is committed to modernising the way in which we deliver new equipment and support to the Armed Forces. In order to do this, we must continually examine the way we do our business to improve the resources available to the front line. These changes are an essential part of that strategy.