Defence Reform Bill

Public Bill Committee, 3 September 2013.

Albert Owen (Labour, Ynys Môn)

Good morning. Before we begin, I have a few preliminary announcements. Will members of the Committee please ensure that all electronic devices are turned off or switched to silent mode during sittings? As a general rule, I and my fellow Chair do not intend to call starred amendments that have not been tabled with adequate notice. The required notice period for Public Bill Committees is three working days. Amendments should therefore be tabled by the rise of the House on Monday for consideration on Thursday, and by the rise of the House on Thursday for consideration on the following Tuesday.

I know that a few Members are not familiar with the process of taking oral evidence, so I will briefly explain the procedure. The Committee will be asked to consider the programme motion on the amendment paper—which is in today’s bundle and was agreed yesterday—for which debate is limited to half an hour. We will then proceed to a motion to report written evidence and a motion to permit the Committee to deliberate in private in advance of the oral evidence session, which I hope we can take formally. Assuming the second of those motions has been agreed to, the Committee will then move into private session. Once the Committee has deliberated, the witnesses and members of the public will be invited back into the room for oral evidence to begin.

Philip Dunne (Conservative, Ludlow)

I beg to move,

That—

(1) the Committee shall (in addition to its first meeting at 9.55 am on Tuesday 3 September) meet—

(a) at 2.00 pm on Tuesday 3 September;

(b) at 11.30 am and 2.00 pm on Thursday 5 September;

(c) at 10.30 am and 4.00 pm on Tuesday 8 October;

(d) at 11.30 am and 2.00 pm on Thursday 10 October;

(e) at 8.55 am and 2.00 pm on Tuesday 15 October;

(f) at 11.30 am and 2.00 pm on Thursday 17 October;

(g) at 8.55 am and 2.00 pm on Tuesday 22 October;

(h) at 11.30 am and 2.00 pm on Thursday 24 October;

(2) the Committee shall hear oral evidence in accordance with the following Table:

Albert Owen (Labour, Ynys Môn)

Copies of written evidence received by the Committee will be made available in the Committee Room.

Examination of Witnesses

Albert Owen (Labour, Ynys Môn)

Good morning. We will now hear oral evidence from the Defence Industries Council, ADS and the Royal United Services Institute. Before calling the first Member to ask a question, I would like to remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme motion the Committee has just agreed. This morning, we are scheduled to finish at 11am. I hope we do not need to interrupt people, because we will finish at 11 o’clock on the dot. It might be appropriate if Members who wish to declare an interest do so now, before we proceed.

Mark Lancaster (Conservative, Milton Keynes North)

I would like to declare an interest as a member of the Reserve forces.

Penny Mordaunt (Conservative, Portsmouth North)

I would also like to declare my interest as a member of the Reserve forces.

Tobias Ellwood (Conservative, Bournemouth East)

Likewise, I would like to declare an interest as a member of the Reserve forces.

Alison Seabeck (Labour, Plymouth, Moor View)

I would like to draw attention to my entry in the Register of Members’ Financial Interests.

Kevan Jones (Labour, North Durham)

I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests: I am on the advisory board of Northern Defence Industries, and it is a non-remunerated position.

Albert Owen (Labour, Ynys Môn)

Thank you. Before I call Alison to ask the first question, I ask the witnesses to introduce themselves for the record.

Albert Owen (Labour, Ynys Môn)

Thank you. Alison.

Alison Seabeck (Labour, Plymouth, Moor View)

I look forward to serving under your chairmanship, Mr Owen, and that of Mr Brady as the Committee progresses. I also thank the witnesses for attending today.

You have all expressed concerns about the proposals in the Bill, while equally accepting the underlying assumptions of the need for reform of defence procurement. Could you initially set out for the Committee the evidence you see for a GoCo being an effective option—if you can?

Alison Seabeck (Labour, Plymouth, Moor View)

So you feel that we need a competency audit?

Albert Owen (Labour, Ynys Môn)

Would anybody else like to comment on this?

Kevan Jones (Labour, North Durham)

To what extent have some of those delays and cost overruns been a result not of skills, but political decisions in taking into account budgets, moving main-gate rightwards and also military demands in changing the specification of projects?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

First, I think you should be aware that I represent Plymouth, Sutton and Devonport. That includes Babcock, which runs the dockyard as well. There is one thing I am quite interested in. I was part of an all-party group inquiry into the procurement of public buildings. Although that has no relevance as far as this is concerned, one of the things that came out of that inquiry was the necessity to make sure that potential contractors educated the client as to what they were going to be producing and doing. To what extent do you find that that actually happens? From your perspective, do you need to make sure that the Ministry of Defence understands what it is actually buying? Has it thought it through, or does it simply issue a contract and you find it quite easy to run with that?

John Woodcock (Labour, Barrow and Furness)

May I develop Kevan Jones’s question on the two strands of problems in the budget? One is the lack of technological skills, but I want to focus further on the over-commitment of the budgets and decisions that are made at a political, Government level, resulting in that over-commitment. If a GoCo existed broadly on the terms set out in the Bill, what improvements, if any, could it make to that decision-making process in Whitehall?

Albert Owen (Labour, Ynys Môn)

I will ask the Minister to ask his question, because we really need to move on.

Philip Dunne (Conservative, Ludlow)

My question is to Paul Everitt, who talked about the evaluation criteria. As you know, ultimately this will be a choice between the best GoCo proposal and the DE&S-plus proposal. You wanted us to be clear about the evaluation metrics. What, in your view, would ensure that a robust, transparent and fair choice is made? What do you want to see in that decision making?

Tobias Ellwood (Conservative, Bournemouth East)

May I welcome the panel to this Bill Committee sitting? There has been considerable debate about the concept of putting defence acquisition and support into the private sector. You spoke about the black hole or the bow wave—however you want to justify it. One benefit seems to be transparency, which is very much welcome. May I ask whether you have done or intend to do any analysis of the concept of GoCo, what its impact will be, and whether it will be a positive move forward?

Tobias Ellwood (Conservative, Bournemouth East)

The status quo.

Tobias Ellwood (Conservative, Bournemouth East)

Very quickly, you mentioned that you have some analysis under way—some papers are being produced. When might we expect them to be published?

Tobias Ellwood (Conservative, Bournemouth East)

I was just giving you a free advertising slot.

Damian Hinds (Conservative, East Hampshire)

Dr Louth, can you explain why you believe that a third comparison is needed? If, by definition, DE&S-plus is better than DE&S, where does your third comparator fit into the analysis?

Tobias Ellwood (Conservative, Bournemouth East)

In a way, that was my question. From the perspective of cost and financial benefits, surely that will be done using as a yardstick current performance and how we do things now?

Tobias Ellwood (Conservative, Bournemouth East)

I think that that might be for the Minister to determine later on. I presume that a benchmark will be taken from where we are today.

Russell Brown (Labour, Dumfries and Galloway)

Good morning, gentlemen. Industry has said that a key concern with defence contracts currently is certainty. To what extent do you think a GoCo would provide greater certainty to companies bidding for contracts?

Kevan Jones (Labour, North Durham)

That is a perfect world, but you know that we do not live in a perfect world. How would a GoCo deal with the problem that we faced during the previous Government as regards urgent operational requirements, which meant very quick decisions were taken on the kit that was needed and, inevitably, budgets were diverted from other programmes, which were reprioritised? How would that fit into a GoCo?

Kevan Jones (Labour, North Durham)

No, but we were sat here in 1997 considering the defence procurement budget, and we would not have predicted—very few people would have—that we would be in Afghanistan, or that we would need a whole fleet of mine-protected vehicles and improvised explosive device technologies. How quickly do you think a GoCo could react to that, in terms of skewing budgets, which is a political decision and not for the GoCo? Would that lead to difficulties with the idea that the GoCo will deliver everything?

Albert Owen (Labour, Ynys Môn)

A brief response to that, please.

Albert Owen (Labour, Ynys Môn)

I need to move forward, because we need to speed up a little. We have a very condensed session.

Alison Seabeck (Labour, Plymouth, Moor View)

You have talked about security and continuity of the GoCo. We know that the contracts will initially be let for nine years. Do you have a view on whether those contracts can be successfully evaluated after nine years, given that the length of Ministry of Defence programmes is often much longer than nine years? Do you also have a view on whether an incumbent GoCo will be in an almost unassailable position, with its internal knowledge? It will be quite difficult for the Government to replace it after nine years. Do you think that the GoCo will be in too strong a position at the end of those nine years to be replaced?

Albert Owen (Labour, Ynys Môn)

To respond to that point, you can give us written answers later if you wish, and we will use those in our deliberations.

Julian Brazier (Conservative, Canterbury)

Mr Everitt, in ADS’s submission, you say that in clauses 7 and 8, which give the new entity the same access to information as the existing entity,

“There is inadequate protection for suppliers’ IP and commercially sensitive information”.

Would you like to say why that is?

Julian Brazier (Conservative, Canterbury)

May I pursue that a little further? Suppose for the moment that the clause in part 2 of the Bill were put into part 1, so that we really had tough criminal sanctions enforcing the rule. There are foreign companies among the bidders in both the main consortia. Would it worry you that there might be some difficulty, particularly where individuals were concerned, in enforcing the rule? I am asking you a leading question.

Julian Brazier (Conservative, Canterbury)

Thank you.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

It is likely that some defence companies will form a consortium to be part of the GoCo. Do you foresee conflicts of interest arising if a company bidding for a particular contract is also a member of the winning consortium? How do you think that can be managed?

Albert Owen (Labour, Ynys Môn)

Professor Taylor, do you want to add anything?

Kevan Jones (Labour, North Durham)

You are talking about companies now. What about individuals who work for the GoCo being poached, or moving on, in later life, to defence contractors? I am talking about them not taking specific knowledge of an individual programme, but understanding how the processes work. How would you stop that?

Kevan Jones (Labour, North Durham)

It does not work very well, does it?

Julian Brazier (Conservative, Canterbury)

Presumably that would not be enforceable in America. That presupposes that you are dealing with British employees.

Tobias Ellwood (Conservative, Bournemouth East)

On the concern about employees going elsewhere, I say this without any knowledge whatever of their interest, but if companies such as G4S, Serco and RAND Corporation got the contract for this, would you be content? The fact that a foreign company had gained the contract would not make you nervous at all?

Tobias Ellwood (Conservative, Bournemouth East)

But you would not say that it had to be a British company that ran it; you would not limit it.

Albert Owen (Labour, Ynys Môn)

Moving on now to single-source contracts—John.

John Woodcock (Labour, Barrow and Furness)

Speaking as a Member of Parliament for the place that houses the finest, and indeed the only, source for the United Kingdom to produce our incredible submarine fleet, can I ask about single-source contracts? Generally, are the proposed changes proportionate to the identified problems? In particular, in picking up on that, Mr Everitt, can you talk about your proposal of the pharmaceutical price regulation scheme as potentially a more appropriate model to combat what you see as lack of political independence?

Russell Brown (Labour, Dumfries and Galloway)

Obviously, there are clauses in the Bill specifically dealing with monitoring and compliance regulations. Have any concerns been raised regarding the power to exempt contracts from the monitoring and compliance regulations, and to what extent would you expect exemption to be given more often to overseas suppliers? What would the impact be for UK businesses if that were to be the case?

Heather Wheeler (Conservative, South Derbyshire)

I am interested in the small and medium-sized enterprise side of the matter as well, particularly in whether you think there will be extra burdens placed on SMEs, or whether there might be a way around it, maybe with thresholds or something like that. Do you have any views on that?

Albert Owen (Labour, Ynys Môn)

Would any other witnesses like to comment before we move on?

Albert Owen (Labour, Ynys Môn)

Thank you. Moving on now to Reserves, Russell.

Russell Brown (Labour, Dumfries and Galloway)

The Bill’s impact assessment states that the Government’s intent is to ensure that the

“reserves will complement the regulars within an integrated Whole Force, providing military capability in a different way from the past to deliver the range and scale of military forces and skills required.”

Do you feel that the Bill’s provisions contribute to achieving the same? I appreciate we have a number of Reservists on the Government side here.

Albert Owen (Labour, Ynys Môn)

The next couple of questions will probably be the last. Please bear that in mind.

Philip Dunne (Conservative, Ludlow)

Just picking up on Professor Taylor’s comments on sponsored Reserves, I think, Mr Everitt, that many of your members will already be engaged in sponsored Reserves programmes. Do you see our proposals for Reserves in the Bill as assisting and encouraging the use of sponsored Reserves? Secondly, you have applauded some of the measures that we have taken to respond to particular challenges for SMEs. Are there are other things that you think we should have included in the Bill to help SMEs, rather than your larger membership?

Albert Owen (Labour, Ynys Môn)

Would any of the other witnesses like to make a brief comment before we finish? Right, there is a minute left and I am going to ask the Whip to do some business. I am going to ask him formally to adjourn consideration.

I thank the witnesses for their evidence this morning. As I indicated, if there is any further information they would like to supply to the Committee, would they please do so in writing?

Examination of Witness

Albert Owen (Labour, Ynys Môn)

Good afternoon, Lord West. Thank you for joining us for this oral evidence session. Before calling Alison to ask the first question, I remind Members that questions should be limited to matters within the scope of the Bill. We must stick to the programme order that the Committee has agreed. This session will end at 2.45 pm.

Alison Seabeck (Labour, Plymouth, Moor View)

Thank you for coming, Lord West. This is off the subject of Reserves; it concerns your former role as First Sea Lord. Do you have a view on how the relationships between the service chiefs and the GoCo will work, given that a degree of expertise will be required from each of the service chiefs in order to put in their requests for kit and equipment? Do you feel that measures introduced to tackle the revolving door and ensure that people spend longer on their tours in procurement—say, four years instead of two—will help to make a difference, in terms of the support and advice that service chiefs will receive?

Albert Owen (Labour, Ynys Môn)

Of course.

Alison Seabeck (Labour, Plymouth, Moor View)

Those are genuine concerns that the Minister will undoubtedly respond to during the sitting. To come back to Reserves, the Bill’s impact assessment states that the Government’s intent is to ensure that the

“reserves will complement the regulars within an integrated Whole Force, providing military capability in a different way from the past to deliver the range and scale of military forces and skills required.”

Do the Bill’s provisions contribute to achieving that?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

First of all, Lord West, welcome and thank you for coming to see us. Clause 42 of the Bill talks about renaming the Army Reserve as the Regular Reserve, and changing the Territorial Army to the Army Reserve. Do you think that that will be confusing? How can we ensure that it will not be confusing?

Mark Lancaster (Conservative, Milton Keynes North)

Lord West, may I come in on the back of a comment you made a few moments ago about concerns about the Reserves being at readiness? I think you said that on day one they are not as good as their counterparts. The Ministry of Defence has laid out very clearly the cycle in an enduring operation—a cycle of 10 six-month cycles. The first six-month cycle is to be deployed by the rapid reaction brigade, which is currently 16th Air Assault Brigade. Reserves, in the main, do not begin to be deployed until cycle 3, giving a 12-month preparation time. Are there any points in those 10 operational cycles at which you feel that we have a weakness, in that the number of Reserves we will be using will not be given sufficient time—I think the minimum is one year—for their training and mobilisation?

Damian Hinds (Conservative, East Hampshire)

Lord West, the Bill extends the circumstances in which Reserves could be called out to any purpose for which the Regular forces could be used. Do you think that is appropriate? In practice, do you think that “any” will mean “all”? What limits might exist?

Damian Hinds (Conservative, East Hampshire)

For what types of activity or deployment do you think the integration between Regulars and Reserves will be most challenging?

Damian Hinds (Conservative, East Hampshire)

Presumably that is about where individuals are in terms of their training and development, rather than excluding certain activities.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

I am interested to know whether you would end up deploying Reservists as a unit, with necessary leadership at the top, or would you say they have to be deployed into the Regular battalions or regiments?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Your background is in the Navy. Would you say that we need to deploy Reservist sailors into ships, and similarly with the Royal Marines—that they need to be melded in together.

Julian Brazier (Conservative, Canterbury)

Sorry to contradict you, Lord West, but the Secretary of State did make it clear that in the case of the Army, we are committed to going back to where all our English-speaking counterparts are, which is deploying Reservists again as four bodies, more at sub-unit level than unit level, except in easier circumstances.

Julian Brazier (Conservative, Canterbury)

Companies and squadrons, rather than battalions.

Jeffrey Donaldson (DUP, Lagan Valley)

Clause 43 also aligns the duration of service in which Reservists may be called out. What is your assessment of those measures? Are the time periods appropriate for each of the services?

Jeffrey Donaldson (DUP, Lagan Valley)

And you feel that would be a deterrent to attracting more Reserves.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

This may not be an appropriate question, in which case, Mr Chairman, you will no doubt tell me. How do we ensure that the Reservists and their families are well looked after, especially in relation to their mental health, when they come out? There is a big issue in that, if you are a Regular in a regiment and you go back, you are on base; but if you are a Reservist and you go home—you may go home to Aylesbury, for example, if you are in the Navy—all of a sudden you do not have that support mechanism behind you. How do you think we deal with that?

Kevan Jones (Labour, North Durham)

Clause 43 creates two types of Reservists. The first group will be under the existing rules and they will have different call-out periods from the new Reserves. Do you think there will be a problem with Reservists fighting or being called up for different periods?

Albert Owen (Labour, Ynys Môn)

It has been said now.

Philip Dunne (Conservative, Ludlow)

Lord West, one of the clauses we are seeking to introduce would remove discrimination by employers against Reservists in the event that they were to lose their job on account of being a Reservist. Did you have any experience of such discrimination when you were serving?

Philip Dunne (Conservative, Ludlow)

But you agree with the principle that we should be able to seek to minimise discrimination in the Reserves in the same way that we do in other aspects of the services?

Philip Dunne (Conservative, Ludlow)

You mentioned dealing with SMEs as part of your concerns about the GoCo. As far as SMEs and losing Reservists to service when mobilised is concerned, we have sought to take some steps to provide compensation for SMEs that is not provided to larger companies. Do you think that that will be enough? Is it an appropriate step?

Philip Dunne (Conservative, Ludlow)

Have you got some recommendations on how we should stimulate those numbers?

Philip Dunne (Conservative, Ludlow)

Of course, the Royal Naval Reserve is better recruited than the Army Reserve, historically, so there may be some tips that you could give us from your experience. I do not know whether you ever had responsibility for the Naval Reserve.

Julian Brazier (Conservative, Canterbury)

May I put a possible answer to you, Lord West? Although the numbers of the communities you are looking at are much smaller, because there are only a few RNR units, the size of the communities are typically comparable individually to, say, a company or squadron in the TA. May I suggest that one of the reasons why the RNR has been historically better recruited is that almost all its units are commanded by Reservists—people who do civilian jobs themselves?

Philip Dunne (Conservative, Ludlow)

On a similar tack, are you familiar with the extent of Reservists in some of our allied nations—I mean, the proportion of total strength that is made up by the Reserves, compared with the challenge we have set ourselves? We are looking to raise the Army Reserve to 30,000, which would be some 17% of the total strength. That compares with 55% of the US’s total strength, 51% in Canada and 36% in Australia. In terms of the scale of the ambition, it is half that of Australia.

Philip Dunne (Conservative, Ludlow)

We will try to keep that bit off the record; at least, we will not send it off to Australia or Canada. May I take you back to where Alison started, on some of your observations on GoCo and single source—[ Interruption. ] Sorry, go on.

Kevan Jones (Labour, North Durham)

Could you elaborate on the American example? I heard a previous Secretary of State argue that America is an example, but is that not a very different model in terms of how the National Guard and other Reserves are formed—not just culturally but organisationally?

Julian Brazier (Conservative, Canterbury)

But you do not think there is a lesson for us there?

Kevan Jones (Labour, North Durham)

Also, a difference in the United States is that the National Guard and other Reserve units have their own equipment and dedicated headquarters, on a scale that—

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

I was in Washington in July and I visited the Department of Veterans Affairs. One of the things it is good at doing is ensuring that people are identified as being in either the army or the military of some description, and that is something we need to be better at doing.

Philip Dunne (Conservative, Ludlow)

Taking you back to your concerns about the GoCo, you mentioned one in particular, and I would be interested in your experience. Intellectual property, and making sure that that is adequately secured within a new environment, is clearly very important to us and our contractors. At present DE&S uses a large number of external consultants to advise on specialist roles on a whole host of procurements. I imagine that that was the case when you were in post as First Sea Lord. Why do you think there would be any greater risks if we moved to a GoCo structure than from the access that external, non-MOD employees, non-civil servants, have to some of these contracts and the intellectual property they contain?

Philip Dunne (Conservative, Ludlow)

Why do you think there would be less control?

Philip Dunne (Conservative, Ludlow)

Although in some instances we undertake a procurement by having a contest managed by an external entity already, so you might get a particular adviser who in effect runs the procurement for a particular speciality.

Kevan Jones (Labour, North Durham)

It would be interesting to see how a GoCo would react to the NAO report about the change in the F-35 decision.

Kevan Jones (Labour, North Durham)

On intellectual property, do you have concerns about how our closest allies who are working on programmes would react to the fact that some of the things you have talked about are at arm’s length from the Government?

Albert Owen (Labour, Ynys Môn)

Last question.

Philip Dunne (Conservative, Ludlow)

To be honest, I was going to ask you whether there are any other things that we have not touched on that you would like to raise with the Committee.

Philip Dunne (Conservative, Ludlow)

The only thing I would warn you, Lord West, is that it will go on to the public record. So depending on whether you are concerned about that, we would be delighted to receive it.

Albert Owen (Labour, Ynys Môn)

I am sure that that can be circulated to Members. On behalf of the Committee, may I thank you for the way in which you have answered the questions, and for joining us this afternoon?

Alison Seabeck (Labour, Plymouth, Moor View)

Thank you very much for coming. Your submission to the Committee concentrated very much on the Reserves. There are three parts to the Bill, so although I am going to ask you a general question, hopefully it will encompass the Bill more widely. Could you tell the Committee how effective the MOD has been in engaging with your members about the provisions in the Bill and dealing with your concerns? In particular, could you tell us whether your members generally support the measures regarding Reservists? What are their concerns? Also, do you have any concerns—ADS raised some earlier—about the potential burdens on SMEs, particularly regarding part 2 of the Bill and the way in which substantive contracts are dealt with? People in the supply chain could potentially find themselves burdened with additional regulations and demands.

Alison Seabeck (Labour, Plymouth, Moor View)

Can I come back to something you said in your answer? You talked about employment legislation and issues that might arise. Can you explain what you meant?

Alison Seabeck (Labour, Plymouth, Moor View)

You clearly have experience from your members of that type of circumstance and you fed all that in during your discussions with the MOD.

Damian Hinds (Conservative, East Hampshire)

Mr Cherry, you have experience of being in the Reserves. With that in mind, given that the Bill extends the circumstances in which Reserves may be called up to serve any purpose for which Regulars could be put into action, do you think employers will be deterred by that, relative to the enthusiasm they might otherwise have for supporting the programme?

Damian Hinds (Conservative, East Hampshire)

Do you think there is wide awareness among your membership of what Reserves do? Is there awareness of the breadth of activity they may go through and the training benefit that may accrue to the firm?

Damian Hinds (Conservative, East Hampshire)

Do you think these awareness days are the key to doing that or is there a broader effort required, perhaps not just involving the MOD and business organisations, but the role of the media and so on?

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

I am a member of the Federation of Small Businesses. I think you should be aware of that.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

One of the things that you might want to do is to make sure you include it in your annual conference, and also in your newsletters too, to make sure that your members—our fellow members—would actually be aware of all this.

Kevan Jones (Labour, North Durham)

I will pick up Damian’s point about attitudes of small businesses to deployment. Clearly, individuals being deployed to Afghanistan is quite visual. Do you think that there would be a difference between somebody being deployed, say, to Afghanistan, Iraq or a smaller foreign conflict and Reservists being called to things like local emergency floods, or covering for fire strikes? Do you think that there would be a different attitude as to whether the employer is happy to release people?

Julian Brazier (Conservative, Canterbury)

First, can I say how much I appreciate the work of the FSB in this area? Your own branch came in to brief me about this.

Julian Brazier (Conservative, Canterbury)

I have three quick points. First, you mentioned employer awareness days. Something the Australians and Canadians do is provide regular reports: through the email system it can be done very cheaply and easily to employers, without much bureaucracy on what employers are up to. I will give you the second point with that. Typically, rather than holding a drinks party or a session in the training centre, they will invite employers to visit an interesting piece of training. Do you think that either of those initiatives is worth pursuing?

Julian Brazier (Conservative, Canterbury)

My last question concerns the way that the self-employed are not included in the provisions for SMEs and micro-businesses. The self-employed play quite an important part: barristers and self-employed telecom engineers are two that you find a lot of in the Reserves. They are both groups that can slot in and out of their employment relatively easily but suffer quite a bit of penalty when they come back, because, clearly, they have to pick up on their client base and so on. Do you think that there is a case for including the self-employed in those arrangements?

Mark Pawsey (Conservative, Rugby)

Mr Cherry, may I ask you about the maximum call-out period for deployed Reserve forces? The Bill envisages a maximum of 12 months. I ran a small business before arriving here and I know that 12 months is a very long time in the life of a small business. What is your view about 12 months and the possibility of perhaps even a longer period?

Mark Pawsey (Conservative, Rugby)

Why is 12 months better than six months?

Mark Pawsey (Conservative, Rugby)

If 12 is better than six, is 18 better than 12?

Mark Pawsey (Conservative, Rugby)

I wonder whether some of the negative views that have been expressed by your members are expressed in the light of recent military experience. Do you think your members would have a different view if we had had a greater period of stability than we have seen in recent years?

Mark Pawsey (Conservative, Rugby)

That may be the case, but we need the support of small businesses. If there had been a period of stability, do you think your members would have been saying slightly different things?

Damian Hinds (Conservative, East Hampshire)

I wondered, in your panel research with your members, whether you have put a question about the length of deployment. The view you have expressed is interesting and presumably would apply more to highly skilled industries, not so much to places with high staff turnover. I wonder how widespread that view is, and whether you are able to say anything about how it varies by sector.

Albert Owen (Labour, Ynys Môn)

Before I bring in Penny, there are a couple of supplementaries. Briefly, please, David, and then Philip.

David Hamilton (Labour, Midlothian)

The supplementary is along the lines that in my area we have a number of micro-companies. They are supportive because of the barracks and so on; we have grown up with that in mind. However, one of the real concerns raised is that we have a company of eight people and two of them are Reservists. Has the MOD listened to concerns that you cannot afford two people to be away at the same time? That is a real concern.

Philip Dunne (Conservative, Ludlow)

I would like to start by thanking you, Mr Cherry, and your organisation for the work that you have put in to help us with this proposal for the Reserves. The FSB has put in a lot of effort, I know. I appreciate the comments you made at the opening about how well the relationship is developing.

I have a question on the back of this survey, which I think is extremely helpful to provide some quasi-factual basis to your commentary. Many companies do not know who are Reservists and who are not. I noticed that 7% ticked a box that said they do have Reservists, so they obviously knew that. Did you have a question in the survey asking whether they knew they had any Reservists? You obviously had a question saying, “Do you employ or would you propose to employ?”

Philip Dunne (Conservative, Ludlow)

One of the risks of the discrimination clause that we are putting in is that it will deter employers from asking whether someone is a Reservist or not. Whereas, in fact, it could be very useful information for them in being able to provide support. There is a delicate balance there. Do you have any advice for us?

Penny Mordaunt (Conservative, Portsmouth North)

Turning to the incentive and targeted payments, do you think that they are sufficient for us to achieve our objectives on the recruitment and retention of Reservists, and to reduce the barriers to individuals actually joining Reserve forces?

Penny Mordaunt (Conservative, Portsmouth North)

And presumably in the long term that is an issue that you would monitor.

Albert Owen (Labour, Ynys Môn)

That was a good, quick answer.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Clause 45 makes provision to exempt Reservists from the statutory two-year qualifying period for claiming unfair dismissal from their civilian employment, if being a Reservist is the reason given for them being given the heave-ho. In your experience, are employees who are in service more likely to be subject to apparent unfair dismissal, and will the provision sufficiently address the problem identified in the Bill?

Mark Pawsey (Conservative, Rugby)

We have heard one or two negatives on the role of Reservists in small businesses. Can you tell us some of the benefits that accrue to small businesses as a consequence of employing Reservists?

Albert Owen (Labour, Ynys Môn)

Thank you. Before I bring in Russell, it has just been indicated that Alison and John want to ask a question on GoCo that was not answered earlier.

Alison Seabeck (Labour, Plymouth, Moor View)

There are a couple of issues to raise on the GoCo and the single-source parts of the Bill. The Bill is quite regulatory in those parts, and it is not a question of one in, one out; the GoCo has been exempted from that rule. Do your members have any concerns—they were voiced earlier today by ADS—about the application of the regulations to subcontractors, many of whom will be SMEs? It might be something that you have not yet picked up on, but your views on that, either now or later, would be welcome.

The second point is about whether you feel that the establishment of a GoCo will make it more or less easy for SMEs to access MOD contracts. Fujitsu has published a survey this week that said that SMEs still found it difficult to access Government contracts, across Government. That obviously included the MOD. I wondered whether you felt that the GoCo would lead to greater opportunities for businesses.

John Woodcock (Labour, Barrow and Furness)

That is the avenue that I was going to pursue as well, so we shall wait for written evidence.

Philip Dunne (Conservative, Ludlow)

While recognising that you will be writing to the Committee, I have a couple of questions on this. It has been alleged that SMEs will, by definition, be disadvantaged by going down the GoCo route. Our previous witness said that was one of his concerns. When you do reply, if you are not able to do so now, I hope that you will consider how and why that might be the case. I personally do not see it, but if you think that is a concern, we would very much be interested to hear it. The other aspect is whether there are any concerns for SME participation in defence exports as a result of a GoCo. Again, I have real difficulty in understanding why that might have any impact at all.

You might be able to answer this question now: as a result of defence transformation and delegation of capability-setting powers from the MOD to the domains, it is now possible for contractors who are seeking to win defence business to have a number of potential clients within the MOD. In the past it was more centralised, but it is now more devolved. It should allow SMEs to have better access to smaller contracts, recognising that the windows of entry to the MOD have become larger, so it may be more complicated to access a greater proliferation of contracts. Is that how you see it?

Philip Dunne (Conservative, Ludlow)

We have established the SME forum, which, as you know, I chair every four months, and at which you are represented. Do you think that is helpful? This is slightly beyond the legislation, so it might be rather inappropriate, but as you are here, Mr Cherry, and it is relevant, it would be interesting to know if you think that is helpful. You mentioned the simplification and the pre-qualification questionnaires. We also have the Contracts Finder website, where all opportunities over £10,000 are advertised. Are there other things that we should be doing on a practical level, rather than at a legislative level?

Philip Dunne (Conservative, Ludlow)

It is not our intent that the GoCo should have any impact on any of the engagement that we presently have with small businesses along these lines. Do you think that we are misguided in that expectation?

Albert Owen (Labour, Ynys Môn)

That is very fair. The Minister asked you about a number of points there, and if you want to clarify them further in writing, that would be helpful.

Russell Brown (Labour, Dumfries and Galloway)

Mr Cherry, the Minister just asked about the practical level, rather than the legislative level. Can I bring you back to that, and ask whether you are aware of any additional measures that you have not mentioned already that you think should be added to the Bill for it to secure the support of your members?

Albert Owen (Labour, Ynys Môn)

We are running slightly ahead of time, so does any other Member want to raise anything before I bring the Minister in for the final question?

David Hamilton (Labour, Midlothian)

Going back to the Minister’s question, you indicated that things have improved substantially. Does that mean that you no longer have the problem of major contractors winning the contract and then subcontracting out to your members, who then pick up the liability for developments and so on? That was a problem in the past, back when I was on the Defence Committee.

Albert Owen (Labour, Ynys Môn)

A final question from the Minister.

Philip Dunne (Conservative, Ludlow)

Last year, 40% of new contracts placed by the MOD were placed with SMEs, so we think that we are substantially opening up direct access to SMEs. We also recognise, however, that a large proportion of SME work is done through the supply chain from prime contractors, because many of the 60% of contracts could not be placed with SMEs; they would, by definition, cease to be SMEs were they to win the contract. Given the proportion that we are doing directly, and the fact that some sub-contractors, under the single-source arrangements, for which we are legislating in this Bill, will place a burden of information supply on suppliers, do you think that the information request, as far as you have understood it—I accept it will come out mostly in regulation, rather than in the Bill—will be an unwelcome burden on SMEs? Will they be able to cope?

Albert Owen (Labour, Ynys Môn)

Thank you very much, Mr Cherry, for answering the questions. As I indicated, you may wish to write to us with further comments.

Albert Owen (Labour, Ynys Môn)

It is left to me to bring the business to an end for the day. The Committee will sit again to take further evidence on the Bill at 11.30 am on Thursday 5 September.