On risk management, the Public Accounts Committee concluded:
“The Department admitted that the figures showed that some projects had not been properly de-risked in the Assessment Phase and this was an indication that Smart Acquisition was not being applied thoroughly or consistently.”
Much more needs to be done to manage risk. The SDR sets out that 15 per cent. of a project’s budget should be spent prior to the key decision-making point, known in the trade as main gate, to try to reduce that risk. However, smart acquisition projects have seen only 4.4 per cent. of their total budget being spent prior to main gate, well short of that target of 15 per cent. that the Government have set themselves.
The Minister has just told us that the Government have taken that message on board, and we welcome that, but they are a long way short of achieving the objective that they themselves have set. It is no good their bleating on that the problems are exclusively with projects started by the last Conservative Government, because Sir Peter admitted last week that one of the reasons smart acquisition projects had not encountered difficulties similar to those of the so-called legacy projects was that they were in the relatively early stages, and could well run into problems later in the procurement cycle when such difficulties traditionally arose. So the answer to the hon. Member for Glasgow, Pollok is that the jury is out on his Government’s own projects. We wait to see whether the Government fulfil their own commitments.
Part of the solution is to ensure that there is adequate research funding. However, the amount spent on research has been falling since the Government came to power. At £450 million, the current research budget is less than half the total research budget in 1990. We acknowledge that the culture around the DPA is increasingly one of risk-aversion—not fear—to which the Defence Committee drew attention, as officials seek to limit the risk of a kick in the backside by the NAO, the PAC and the Select Committee. It must be given some leeway to explore the possibilities of science, without feeling at every point that it may be kicked. I hope that we can share that aim with the Government. This is not a criticism of the Government, but a criticism of the system, and together we must find ways to address that, so that the DPA scientists can do their job without feeling that if they fail at the cutting edge of technology, they will be kicked in the backside, because that is not the answer.
There are serious issues here. Rolls-Royce tells me that unless it has some support for the hot-end development of its aero-engines, it could shift the company out of the United Kingdom. That is a serious issue to which I urge Ministers to pay attention. If Rolls-Royce were to move out of the UK, I suspect that there would be an uproar; not an attack on the company, which is answerable to its shareholders, but an attack on the Government who allowed that to happen.
There continue to be great concerns about the future of Qinetiq, in which, as the Minister knows, I have a vested interest as its headquarters are in my constituency. My hon. Friend the shadow Secretary of State for Defence fully shares my concerns on that front. The Minister must face the fact that being starved of resources for the development of new technology is driving business to the United States, where Qinetiq’s minority shareholder, Carlyle, is based. Once the business is in the United States, we then face the difficulties of repatriating the benefit of that development work to the United Kingdom, thanks to the operation of the international traffic in arms regulations in the United States, to which the Minister referred.
Another issue of concern was raised at the weekend in The Observer, although for that reason I naturally take it with a pinch of salt. Ministers should come to the House and tell us their policy on the whole issue of defence research. If it is t