Defence Reform Bill

Public Bill Committee, 10 October 2013.

Albert Owen (Labour, Ynys Môn)

I remind hon. Members that this sitting will finish at 1 pm.

Clause 6 - Status of contractor

Alison Seabeck (Labour, Plymouth, Moor View)

I beg to move amendment 11, in clause 6, page 5, line 28, after ‘State’ insert

‘, in accordance with any instruction or guidance that the Secretary of State may provide.’.

We tabled the amendment because we continue to have concerns about the freedoms apparently given to the contractor. While the amendment is probing, it is important that we understand the reasoning behind the clause, which I am sure the Minister will set out clearly when he speaks. We touched on a related area on Tuesday, but could the clause effectively allow a renegotiation of existing contacts by the GoCo contractor, whether acting in the name of the Secretary of State or not? Does the Minister foresee that creating any uncertainty for industry? Will the GoCo contractor, for example, have free rein in the way it carries forward existing contracts or will it be expected to follow the Secretary of State’s guidance? If so, how will that be ensured? That is part of the reason for the amendment’s wording. The status of the contractor and the signals sent to it about the level of discretion it may have are important.

Should companies with existing contracts or terms of business agreements be worried? Few contracts have yet been renegotiated, although the Minister highlighted one that was announced at the Defence Security and Equipment International event held at ExCeL London. Can we, as some of the Bill’s proposals suggest, expect a wave of renegotiations once the GoCo is in place?

Kevan Jones (Labour, North Durham)

Does my hon. Friend think it would help if, as I suggested at the previous sitting, the Minister published a list of contracts that have been renegotiated and of possible future targets for renegotiation?

Alison Seabeck (Labour, Plymouth, Moor View)

My hon. Friend made many important points on Tuesday and I hope the Minister was listening. The suggestion my hon. Friend has just made would enable us better to understand the expectations of the GoCo. Businesses certainly need to understand what particular contracts are likely still to be on the table for negotiation once the GoCo is in place.

Clause 6(2) and (3) give the contractor the power to exercise the powers and rights of the Secretary of State and to fulfil the Secretary of State’s duties and liabilities under existing contracts up to the vesting date, which the explanatory notes describe as the date that

“the contractor first assumes responsibility for defence procurement services”.

The clause also makes it clear that the Secretary of State cannot be penalised for allowing the contractor to exercise such duties or for any liabilities that may occur in its doing so. Perhaps specifying that the use of such powers must be, as our amendment suggests,

“in accordance with any instruction or guidance that the Secretary of State may provide”

would enable a future Secretary of State to keep a degree of closer control.

It is entirely possible, however, that the Minister is about to leap to his feet to say that there is no need for the amendment because subsection (4) is the catch-all. If so, I will withdraw the amendment.

Philip Dunne (Conservative, Ludlow)

It is a pleasure to be back at the Committee for our important deliberations. I am grateful to the hon. Lady for tabling an amendment to clause 6, because it allows us to have a brief discussion about the clause’s intent.

In response to the hon. Lady’s specific questions, the clause’s intent is not to open up the opportunity to renegotiate contracts. The Department takes the view that several of the contracts entered into under the previous Administration were not as rigorously in favour of taxpayer value for money as we think we can secure. A number of renegotiations have taken place, therefore, starting with the largest contracts, and some are ongoing. We are not, however, adopting the approach of renegotiating all contracts—there is a large number of contracts, but only a small number in which there is scope to make improvements. In particular, I draw the Committee’s attention to some of the private finance initiative contracts—throughout Government we are looking to see what we can do about renegotiating certain clauses, to make them better value for taxpayers.

Mr Tobias Ellwood (Bournemouth East) (Con) rose—

Kevan Jones (Labour, North Durham)

rose—

Philip Dunne (Conservative, Ludlow)

I will give way to my hon. Friend and then to the hon. Gentleman.

Tobias Ellwood (Conservative, Bournemouth East)

I shall make a brief intervention before the hon. Member for North Durham steps in and takes over the Committee. If the Minister does not have the answer to my question, perhaps he will write to me. Will there be a difference in the size of contracts from a financial perspective? For anything less than £5 million, for example, will a small or medium-sized enterprise be required to provide a different level of information in comparison with the larger contracts? Smaller SMEs do not necessarily have the legal capabilities to provide the same amount of information.

My second point was to do with challenging the contract. My understanding—forgive me if I have misinterpreted some of the press comments—is that a contract could be challenged from a price perspective for up to two years after the building works have actually started. That needs to be looked at, if so.

Philip Dunne (Conservative, Ludlow)

We are in danger of heading off at a tangent, away from the object of the clause, which is to allow a GoCo—if that is where we end up—to act as an agent on behalf of the Secretary of State in negotiating contracts. Our intent is not to open up as a matter of course contracts that are already in place, and it is highly unlikely, unless there is a particular abuse in a contract that we think could be remedied through renegotiation. For example, small or medium contracts with SMEs are unlikely to be subject to a renegotiation. For renegotiation, we are considering the large contracts in which a substantial saving could be made.

On Tuesday, I may have misled the Committee, inadvertently, by referring to the contract that I announced at DSEI as a renegotiation of an existing contract. It was actually a renegotiation of a new contract at the point at which the previous contract, for support of helicopter engines, had come to a natural break. It is a good example, because that is the approach we are taking more widely: where there is a natural break in a contract, because it terminates or because there is a break clause, we look to renegotiate the terms of the successor contract on a more favourable basis. That is what happened in that case.

Kevan Jones (Labour, North Durham)

That clarification is most useful. Obviously, when contracts come up for renegotiation, they should be renegotiated—all Governments do that.

Will the Minister publish the list of contracts that are earmarked for renegotiation, or whatever he now calls it? In the budget for this year, there is an earmarked figure of £700 million to be saved against renegotiation of contracts. When the GoCo comes into being, will it be renegotiating contracts, rather than the Ministry of Defence?

Philip Dunne (Conservative, Ludlow)

I shall resist the hon. Gentleman’s entreaties to publish a list of things that we might do in the future. I am happy to consider producing a list of contracts that have been renegotiated, which has been the thrust of his questions up until now, but I will not look forward and give him a list of things that we might renegotiate, because we might not do so.

Kevan Jones (Labour, North Durham)

There are two issues there. First, why has the Minister been reluctant to answer my parliamentary questions so far on the contracts that have been renegotiated? Secondly, how are Parliament, the Opposition or Select Committees in a position to take a view on whether the £700 million figure earmarked in the so-called balanced budget is achievable?

Philip Dunne (Conservative, Ludlow)

It is not the purpose of this Committee to determine whether an individual budget figure for the MOD will be achievable. We are talking about setting up the structures for how the procurement would be conducted in future. In the event that we go down a GoCo route, it would be acting on the instructions of the Secretary of State, as we discussed on Tuesday, both to enter into contracts and to implement MOD policy on the instruction of the Secretary of State.

Kevan Jones (Labour, North Durham)

Does that include renegotiation? If so, it is relevant that the Committee should know which contracts the GoCo will renegotiate. It is quite important not just for procurement but for future defence, especially if the so-called balanced budget that the Secretary of State has introduced is reliant on £700 million of savings from renegotiation of contracts.

Philip Dunne (Conservative, Ludlow)

As the hon. Gentleman knows, the Government are reaching new levels of transparency in making available to the public and the Opposition details of contracts that have been concluded. We are not in the business of revealing information about negotiations that are ongoing because they are commercially sensitive. We will not provide information, forward looking, on contracts that have been signed. Any contract over a value of £25,000 is already published. One reason the hon. Gentleman has been getting the answers that he has to his parliamentary questions is that he has been seeking to encourage civil servants in the Ministry of Defence to spend much of their precious time researching information that is readily available on the internet. His researchers could do that work for him.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Can my hon. Friend tell us how much that might have cost the MOD?

Philip Dunne (Conservative, Ludlow)

I am grateful to my hon. Friend for reminding me—

Albert Owen (Labour, Ynys Môn)

Order. I ask the Minister to stick to the clause.

Philip Dunne (Conservative, Ludlow)

Within the context of the clause, Mr Owen, responses to parliamentary questions that might cost more than £600 are routinely refused. I am afraid that in some cases that has applied to questions from the Opposition Front Bench to this Department.

Russell Brown (Labour, Dumfries and Galloway)

I thank the Minister for clarifying the statement he made on Tuesday. Is there any element of the renegotiation, on which he inadvertently gave us misinformation the other day, where savings were made?

Philip Dunne (Conservative, Ludlow)

As the hon. Gentleman will remember from my remarks on Tuesday, I specified a saving to the Department of £300 million over the next six years through the terms of the new contract, compared with the contract that it replaced. So that was a very material saving. It will not go all the way to meeting the figure the hon. Gentleman referred to because it lasts for six years; but if he divides the number by six, he will find that it accounts for £50 million of the £700 million he is looking for this year.

Kevan Jones (Labour, North Durham)

There is another £650 million to go. I know the Minister was not in the shadow Defence team when his party was in opposition, but I think this is a bit rich, given that umpteen thousand parliamentary questions were tabled then daily. Anyway, getting back to the point, Mr Owen, on the question of transparency—

Tobias Ellwood (Conservative, Bournemouth East)

Will the hon. Gentleman give way?

Kevan Jones (Labour, North Durham)

This is an intervention. The hon. Gentleman has been here long enough to know that he cannot intervene on an intervention.

Tobias Ellwood (Conservative, Bournemouth East)

The hon. Gentleman was going on for so long I thought it was a speech.

Kevan Jones (Labour, North Durham)

It is up to the Chair to decide that, not you, Mr—[ Interruption. ]

Albert Owen (Labour, Ynys Môn)

Order.

Kevan Jones (Labour, North Durham)

I am making an intervention, if people will allow me to continue. The Minister hides behind commercial confidentiality. I am not asking him for details of the individual negotiations; I would just like an indication of the types of contract or areas that are being looking at. What is commercially sensitive about that?

Philip Dunne (Conservative, Ludlow)

I can happily respond to the hon. Gentleman as I have already. I have indicated that we are looking at the largest contracts and at the PFI contracts; those are the two specific areas. Let me now make some progress.

Clause 6 provides the contractor with the authority to act on behalf of the Secretary of State in respect of existing contracts, and describes the extent of that authority. Given the complex nature of the role the contractor will play, it is essential to establish publicly from the outset in clear and unambiguous terms the extent of the contractor’s authority.

The clause provides the contractor with authority to act on behalf of the Secretary of State in relation to DE&S contracts awarded before vesting day. That is important because most existing defence contracts are silent on that issue with respect to a GoCo, as that was not in contemplation when the contracts were entered into. The clause removes any doubt about as to whether roles and responsibilities under a contract can be performed by a contractor on the Secretary of State’s behalf.

The provisions of the clause apply to contracts entered into by the Secretary of State before vesting day to give the contactor clear authority to act where a contractor acting on behalf of the Secretary of State to deliver defence procurement services was not mentioned or envisaged in the contract. Without that, the contractor’s authority could be subject to challenge. To put that in context, DE&S manages many thousands of contracts—when I last asked, some 30,000 were extant. Some are of short duration, but many will last several years. The clarity provided by the clause obviates the need for the renegotiation of each contract, which might be required in the absence of this power.

The intention is that the contractor’s employees will enjoy similar authorities to those granted to DE&S civil servants, to the extent that they are necessary or expedient for the delivery of the defence procurement services contract. For any contracts entered into after vesting day—new contracts—it will be incumbent on the GoCo to ensure that such contracts include the necessary rights and authorities that it will require as the Ministry of Defence’s agent for defence procurement services.

The amendment would ensure that the GoCo took on such tasks only

“in accordance with any instruction or guidance that the Secretary of State may provide.”

Its tabling was prompted, as the hon. Lady explained, by a desire to ensure that the contractor does not misuse any rights and powers under the contracts it carries out on behalf of the Secretary of State. However, as she foresaw, the GoCo will act as agent for the Secretary of State only under those contracts and will have no unilateral power or ability to take action or do anything outside the terms of the contracts. The provisions already apply strict rules around the contractor’s permission to act, including restrictions on exercising waivers, terminating contracts, providing indemnities or pledges of credit, settling claims or legal disputes, or accepting additional risk back on the Government. The GoCo contract will make it clear that the GoCo is permitted to act only under an explicit tasking order system, and where explicit investment approval has been provided by the Government.

Tobias Ellwood (Conservative, Bournemouth East)

The Minister has made an important statement. Many of the amendments are probing, and therefore valid, and they suggest that the Bill should be more detailed on the relationship between the GoCo and the companies, but my hon. Friend has made it clear that such detail is not necessary in the Bill as it will be apparent in the contracts set up by the Secretary of State.

Philip Dunne (Conservative, Ludlow)

I am glad that my hon. Friend has raised that issue. He is quite right. The Bill is enabling legislation. The draft contract that has been provided by the Ministry of Defence to the bidding consortia is extensive—so much so that I have not been able to count the number of pages in it, but they run to close to 1,000. It covers a host of aspects that the GoCo contractor will have to take on. Of course, it is a draft, so it has to be negotiated with the consortia, but it covers in great detail many of the concerns that have been raised by the Committee.

Mr Jones rose—

Philip Dunne (Conservative, Ludlow)

I know what the hon. Gentleman is about to say, and the answer is that he is not going to get sight of the draft contract at this stage because it is in the process of negotiation so it is commercially sensitive. Once it has been concluded, it will be available for public review, like other contracts, in due course.

Mr Jones If it has been offered to both consortia I do not understand why it is commercially sensitive. I accept that it is in draft form, but if the Committee and the House are to be reassured about some of the issues around this enabling legislation, it would be a good idea to publish that document, even if it has 1,000 pages. I am sure that some of us are capable of reading 1,000 pages of contract.

Philip Dunne (Conservative, Ludlow)

I have just explained that it is not our intent to publish that document at this stage, but we have committed to publish it at the appropriate point. That is normal Government practice that applied when the hon. Gentleman was a Defence Minister.

I want to conclude my comments on the clause by responding to one of the questions asked by the hon. Member for Plymouth, Moor View about whether contractors with existing contracts should be worried that the power will give the GoCo greater authority to renegotiate those contracts. I hope that I have reassured her that that is not our intent, other than in the larger areas, where, frankly, our contractors are already aware of where we are looking to renegotiate contracts. Such instances are rare and infrequent. I hope she will withdraw her amendment.

Alison Seabeck (Labour, Plymouth, Moor View)

The Minister’s response, particularly to the questions that were raised, is interesting. I share the concern of my hon. Friend the Member for North Durham about confidence in contracts and the need to have sight of that document. Equally, I understand why the Minister responded in the way he did. Will he give us perhaps a ballpark date for when the document is likely to be in the public domain? Will that be on a time scale that enables us to consider it in relation to whether a GoCo or DE&S-plus is the best option? Will it be public before the end of the assessment phase?

To return to the examples given, the Minister clearly stated that the Government are considering renegotiation for big programmes and PFI projects. That is fine, but will that be written into a contract or will it fall within the remit of the clause? Will there be an assumption that those are the projects that the contractor is expected to renegotiate? Will a contractor be able to ignore such an assumption?

Philip Dunne (Conservative, Ludlow)

We do not want to fetter the ability of the Secretary of State or the Ministry to consider contracts. Our general policy is not to re-open existing contracts. If we have a contractual undertaking, we intend to abide by it. There are certain particularly large contracts and certain contracts set up under PFI where it is appropriate, especially if they endure for many years, to look at them again. It is not appropriate to fetter the Secretary of State’s ability to do that.

Alison Seabeck (Labour, Plymouth, Moor View)

I thank the Minister for that reply, and I understand his point, but he is, in part, making our point. I understand that we do not want to fetter the Secretary of State, but might there be a circumstance where guidance was required from him, because it appeared that the GoCo was starting to go through every screw, nut and bolt, down through every single contract? The GoCo could do that, which, in part, is the reason for tabling our probing amendment. We want to ensure that there is no way that that could happen without some referral back to the Secretary of State.

Philip Dunne (Conservative, Ludlow)

I can absolutely assure the hon. Lady that that process could not be undertaken without the Secretary of State being content for it to happen. The GoCo will act as the agent of the Secretary of State through the MOD. It will not do anything unless it has been approved by him or his officials.

Alison Seabeck (Labour, Plymouth, Moor View)

That is a very broad and, to some degree, brave statement, because I suspect that things will happen without the knowledge of the Secretary of State, although perhaps not intentionally. On that basis, and with the good will behind the Minister’s response, I beg to ask leave to withdraw the amendment.

Schedule 2 - Restrictions on disclosure or use of information

Alison Seabeck (Labour, Plymouth, Moor View)

I beg to move amendment 9, page 34, leave out from line 5 to line 7 on page 36 and insert—

Albert Owen (Labour, Ynys Môn)

With this it will be convenient to discuss the following:

Amendment 12, page 45, line 10, in schedule 5, leave out lines 10 and 11 and insert—

‘(1) A person commits an offence if—

(a) the person discloses information, or

(b) information is disclosed or lost as a result of the person‘s failure to prevent the disclosure or loss through measures taken under sub-paragraph (2), and

(c) it is information to which this Schedule applies.

(2) A person holding information to which this Schedule applies must take adequate technical and organisational measures against unauthorised or unlawful disclosure of, and against accidental loss of, the information.’.

Amendment 13, page 45, line 40, in schedule 5, after “being” insert “lawfully”.

Amendment 14, page 46, line 16, in schedule 5, leave out

‘in response to a request’.

Amendment 15, page 46, line 16, schedule 5, at end insert

‘where there is a requirement to disclose notwithstanding available defences,’.

Amendment 16, page 46, line 28, in schedule 5, at end add—

‘(1) For the purposes of sub-paragraph (1), disclosures under paragraph 5(1)(a) to (d) and paragraph 5(1)(h) to (k) must be strictly necessary for the purpose, made in confidence and paragraph 2(1) applies to the recipient of that disclosure.

(2) Prior to making a disclosure under paragraph 5(1)(a) to (d) or paragraph 5(1)(h) to (k), the individual or business to which the information relates must be notified of the intended disclosure and must have the opportunity to challenge that disclosure.’.

Amendment 17, page 47, line 13, in schedule 5, at end add—

Alison Seabeck (Labour, Plymouth, Moor View)

I shall stick primarily to schedule 2 and our concerns over the need to strengthen it. May I seek your guidance, Mr Owen? I assume we will discuss schedule 5 in more detail towards the end of our considerations.

Albert Owen (Labour, Ynys Môn)

Yes.

Alison Seabeck (Labour, Plymouth, Moor View)

Schedule 2 relates to clause 7. We want the schedule to be amended because it is not strong enough. It obviously reads across to schedule 5 in part 2, where protections are offered to business with regard to the transfer and use of confidential information. The amendments and clauses 7 and 8 have been subject to a lot of debate during the witness sessions and in the intervening period. There is a lot to commend the schedule. The protections on disclosure for audit purposes and between parties are fine and as one would expect, but in paragraphs 4 and 5, where various obligations have been placed on parties, there is a failure to detail any penalties or implications for disclosing protected information. Where are the sanctions for inappropriate behaviour?

Many have asked why this part of the Bill does not match or mirror the response in part 2 as to the penalties that might be imposed. I would welcome hearing the Minister’s views on that. We have, perhaps a little crudely, adapted the penalties in schedule 5 and proposed them for schedule 2. He has spoken about the protections that he feels will apply through, for example, data protection legislation, but industry still does not agree, so our objective is to ensure that the obligations on the recipients of the information are clear.

Our rationale is simple: a failure to protect protected information from disclosure should be an offence; disclosure under the Freedom of Information Act should be permitted only where there is a requirement to disclose, notwithstanding available defences; and permitted disclosures need to be clarified as to the extent to which the disclosure is permitted, along with the obligations, if any, on the recipient.

There is also a view that permitting disclosure in an anonymised form should be limited to where the owner or origin of the information cannot be inferred. The authority to inspect processes in relation to any person holding information to which the schedule applies should be added, with a requirement to provide a report to the Secretary of State. The MOD has a wealth of experience in working with highly secret and confidential information and transferring it between parties, yet we are now allowing a further third party, with all the potential we have seen elsewhere for IT systems to be hacked and information leaked or sold on with criminal intent.

It is surely right that the Bill should send a clear signal that, in relation to the business of the GoCos, such offences will be punished. The Secretary of State is, after all, providing the contractor with information to which he was party prior to the vesting date, and to which those businesses would have given him access, because at the time there was no intention of a third party being able to have sight of and make use of that information. If they had known that the clause and schedule were on the horizon, with hindsight they might not have been as open as they were. They certainly need to be reassured that there is every intention to prosecute if there are any breaches specific to the information that will be disclosed if the GoCo comes into being.

We do not believe that the schedule offers the protection that industry feels it needs. We therefore ask the Minister to consider carefully whether the amendment—or a revised amendment, tabled in another place by the Government—might be sensible. I await his response on that, but this is a matter of principle for us and we will probably vote on it.

Albert Owen (Labour, Ynys Môn)

Before I call the Minister, I will clarify and repeat that we are dealing with schedule 2. The amendment on which we will vote, if that is the wish of the hon. Member for Plymouth, Moor View, is amendment 9. If she wishes to press for a vote on amendments 12 to 17, which come under schedule 5, that will be dealt with later with schedule 5. It is okay, however, for the Committee to discuss those matters now.

Philip Dunne (Conservative, Ludlow)

Thank you for clarifying that, Mr Owen. May I ask for one further piece of clarification? The hon. Member for Plymouth, Moor View has restricted her comments to amendment 9 only at this point. I take it that she would like to talk to her other amendments before we put that amendment to the vote. If I have got that wrong, I will restrict my comments just to amendment 9 as well.

Alison Seabeck (Labour, Plymouth, Moor View)

I spoke just to amendment 9, because the others will come up later.

Albert Owen (Labour, Ynys Môn)

They will come up a lot later, with schedule 5. Is the hon. Lady happy discuss those issues now, because they are for debate at this point, or does she wish to delay that?

Alison Seabeck (Labour, Plymouth, Moor View)

I am happy to hear the Minister’s response to the amendments tabled, because he will have a view as to whether the key amendment is relevant, or he may put forward an argument that we will listen to.

Albert Owen (Labour, Ynys Môn)

I am grateful. Just for procedural purposes, I encourage the Minister, if he wishes, to consider the other amendments as well. The hon. Lady will then have the opportunity to close the debate and refer to those amendments if she feels it necessary. If she wishes to press her amendments to a vote, we will, however, vote only on amendment 9 today.

Philip Dunne (Conservative, Ludlow)

Thank you, Mr Owen, for making that crystal clear. I will take this opportunity to discuss all the amendments being considered with amendment 9. That may take some time, so I may go on beyond the moment of interruption. Hopefully I will not—we will see how we get on.

Schedule 2, in its current, unamended form, is necessary to allow a GoCo to have access to existing confidential information provided by defence suppliers, which is held by DE&S, so that it can take over management of existing MOD contracts. If the GoCo does not have access to that information, it will seriously curtail the contracts that it will be able to manage: it will not be able to manage contracts that involve the need to access confidential information provided by a supplier.

If the Ministry of Defence provides confidential information from existing programmes to the GoCo without the protection conveyed by schedule 2 in its current form, the supplier of the confidential information may claim that the Ministry of Defence has no legal right to do so. The MOD could seek to negotiate amendments to contracts, or obtain licences to supply the necessary information. However, the volume of information concerned—as we discussed in relation to the previous clause—the amount of time and resource required to undertake those negotiations, the cost in licence fees that may be incurred and the possibility that the owner of the information may refuse to provide it means that that is not a practical proposition, hence the need for the schedule.

The schedule, in its current form, provides protection for owners of confidential information, because there are only limited circumstances—essentially where necessary or expedient for defence procurement—when the Ministry of Defence can share the information with the GoCo. The schedule also provides that the GoCo is subject to the same confidentiality obligations that exist for the MOD under that contract. For example, some of the information the GoCo has will be classified as UK eyes only, the classification applied to information that cannot be shared with non-UK nationals because of national security issues. A GoCo will not be able to share that information with any employee or parent company that does not meet the nationality requirements. Should the GoCo misuse confidential information, the owner of that information can bring an action directly against the GoCo in the same manner as it could have done if the Ministry of Defence had misused the information.

Kevan Jones (Labour, North Durham)

How will contracts that involve information sharing with, for example, the United States be managed? Will the GoCo have to apply for exemptions to allow the US to access the information or is that matter covered by agreements already in place with the Ministry of Defence?

Philip Dunne (Conservative, Ludlow)

That will depend on the nature of the security classification that the United States requires. For example, if it is held within the UK-US security treaties under which, on the UK side, only Crown servants are eligible to have sight of that information, it will be handled in that way and the military personnel on secondment to the GoCo will be the individuals authorised to see the information. If, however, the information is not subject to such security requirements, other individuals within the GoCo will be able to have access to that information. It will depend on the security vetting status of the information supplied by the US. That will apply to any other countries with which we have Government-to-Government relationships.

Kevan Jones (Labour, North Durham)

May I therefore ask whether the United States, for example—I know other countries are affected as well—is content with that type of arrangement?

Philip Dunne (Conservative, Ludlow)

We covered some of this matter on Tuesday, when we talked about the extent to which our international partners are comfortable with what we are proposing. At this stage, as I said on Tuesday, we have gone through with the United States a number of test examples in contracts that exist between us, and the US has not found any red lines that it is concerned about. That is a long way of saying that we think that that matter has been dealt with adequately to the satisfaction of the United States.

Kevan Jones (Labour, North Durham)

Would that include special contracts—black contracts and others—with the United States?

Philip Dunne (Conservative, Ludlow)

I did not completely hear what the hon. Gentleman said, but I think his intent was to ask whether that answer included the most sensitive security contracts. My understanding is that the United States has raised no red lines in relation to the proposal. I cannot say with absolute certainty that we have been through the contracts he referred to, but as no issues have been raised that have caused difficulties in the process up to this point, the assumption would be that that issue has been dealt with adequately, or if it has not, it will be.

Kevan Jones (Labour, North Durham)

As the Minister knows, some of those contracts are highly sensitive in nature and cover a whole host of different capabilities. How would the Ministry of Defence deal with those contracts if the United States, for example, raised objections to the system proposed in the Bill?

Philip Dunne (Conservative, Ludlow)

As I said on Tuesday, in the event that the United States is not happy to see a particular contract handled through the GoCo, that contract will be taken out of the scope of the GoCo. At this point, no such contracts have been identified and we therefore do not think there will be a problem. If there were to be a problem on the US’s part, the contract would no longer be in the GoCo’s scope. That is very clear. We are not seeking to disrupt any of the essential relationships we have with the United States. I hope I have been able to reassure the hon. Gentleman on that point.

In the event of a misuse of confidential information, the owner of that information can bring an action directly against the GoCo in precisely the same way that it would have done if the Ministry of Defence had misused the information. That is in addition to the confidentiality obligations that the MOD will place on the GoCo through its contract with the GoCo, the management services contract. The GoCo will be contractually required to maintain the confidentiality of supplier information and not disclose it to third parties without the prior permission of the Ministry of Defence. The GoCo’s parent companies will be third parties, so the GoCo will not be able to disclose the information to them without the MOD’s permission. Significantly, the Official Secrets Act will also apply to the GoCo and its staff. The information will therefore receive essentially the same protection from disclosure as it does in DE&S today.

The proposed amendment to schedule 2 involves deleting the existing schedule in its entirety and replacing it with what is largely a replication of schedule 5, in part 2, which creates a criminal offence of the disclosure of confidential information provided to the single source regulations office. The creation of such an offence is reasonable in that context, where the information is highly detailed supplier information that will be received under the single source pricing regulations and that suppliers are required to provide by statute.

However, that situation is very different from the GoCo situation, and in our view it is not appropriate for a criminal offence to be created for the disclosure of information acquired in the normal course of defence procurement on individual projects and programmes, and where any confidentiality can be protected by the GoCo contract, coupled with the schedule 2 constraints. We do not want to create new offences unless it is absolutely necessary to do so. That has been the Government’s posture, across Departments, since we came into office.

The single source provisions cover a supplier’s future financial performance, anticipated business plans and planned subcontracting activity. That is forward-looking information. It is highly unusual for the MOD to receive access to such information, which is covered by schedule 5. The offence and tariff proposed is consistent with those applied to other price-regulated industries, such as the water utilities, telecommunications and railways. It is not appropriate to day-to-day defence procurement business, which is best conducted through a commercial relationship between the MOD and its suppliers.

The new statutory framework outlined in part 2 has been designed to help ensure that we get value for money on an average of some £6 billion a year of single-source procurement. Our single source suppliers can price in the knowledge that they will not be undercut by a competitor. That is a very unusual position that is not conducive to getting good value for money, so we must address it. That was why the “Yellow Book” regulations were originally established some 45 years ago, and we are seeking to update them through the provisions in part 2.

To update those provisions, we need information about the suppliers’ actual costs. Information alone is not enough—we need enough detail to be able to use the information to negotiate with suppliers on price, comparing their forecast costs with our experience from other projects. We need to be able to track and manage our many hundreds of large single source contracts, so the information must come in a standard format. We need enough detail to uncover where suppliers have charged us costs that are clearly unreasonable. Sadly, that is not the rare occurrence that one might expect it to be, as recent press articles have made all too clear.

If hon. Members are interested, I could identify the sorts of costs charged under single source arrangements that we have sought to recover from companies. However, under the existing “Yellow Book” arrangements, we are only in a position to recover such costs once the relevant contract has come to an end, so it is backward-looking work for the Department. It is currently successful to the tune of between £60 million and £120 million a year. The effort involved in uncovering such overcharges is precisely what has led us to introduce measures to change the single source arrangements so that we do not have to drag information out of contractors as we currently have to.

To get value for money, we require a quantity and detail of information much greater than would be necessary in a typical competitive or private sector environment. Our single source suppliers recognise that, even if they may not particularly welcome it. Much of the single source information covers business plans and other forward-looking projections, as I have said, which justify the cost being charged. Some information is not routinely provided to the MOD for competitive tender procurement.

In return, we recognise that we have a responsibility to our suppliers to treat their information with the care it deserves. Much of it will be commercially sensitive, and some of it market sensitive. Significant commercial damage could be done were it to get into the hands of their competitors or market analysts.

We take that responsibility seriously, as a new criminal offence we are seeking to include in schedule 5 makes clear. In making the new criminal offence, we considered its scope carefully. The new offence will carry with it significant procedural consequences. New processes will have to be put into place to ensure that Crown employees do not inadvertently create a situation where they are suspected of a criminal offence. We need to ensure that the additional overheads and process involved will not overly constrain the operation of Government. Therefore, for example, we have allowed the information to be shared across the Crown if that is needed.

The proposed amendments, taken together, would place additional burdens and responsibilities on the MOD, the GoCo and the single source regulations office in handling industry information, for example, by extending the scope of the criminal offence to the whole of part 1 and all other procurement undertaken through the GoCo, and through the unusual suggestion of allowing industry audit rights over how the Government handle the information. We will resist the amendments when we reach schedule 5, as they do not strike the right balance between protecting sensitive industry information and enabling the Government to fulfil their functions efficiently.

I would again like to thank the hon. Lady for tabling amendment 9 to schedule 2. As I will explain, her amendment is misguided and unnecessary, but it gives us the opportunity to discuss the schedule in some detail and to respond to some of the concerns that industry has raised about whether it could end up with a criminal offence under this section of the Bill.

The amendment would remove provisions in the Bill that will allow the MOD to disclose confidential information received from a supplier to the GoCo and its service providers. That may be providing it with ancillary services such as an IT function, where such disclosures are necessary or expedient for providing the MOD with a defence procurement service.

The amendment would also make it an offence to disclose confidential information provided by a supplier to the MOD or the GoCo, except with the consent of the supplier or under certain other circumstances: for example, where the information is already in the public domain, where disclosure is needed to meet the Government’s requirements under law or regulation, or for carrying out certain ministerial functions. As I have said, the Government intend to resist the amendment.

First, regarding the proposal to remove the current provisions of the Bill that allow the MOD to disclose confidential information to the GoCo, those provisions are necessary to allow the GoCo to have access to confidential information necessary to manage contracts. Without them, the GoCo will not be able to manage many of the contracts DE&S currently manages.

Under proposed new paragraph 5(1)(d), no person would commit an offence by disclosing information where information is disclosed

“for the purpose of enabling or assisting a contractor”—

presumably the GoCo—

“to provide defence procurement services to the Secretary of State by virtue of arrangements”

in the Bill. However, proposed new paragraph 5(4) suggests that such disclosure

“must be strictly necessary for the purpose”—

not just necessary, but strictly necessary.

It is unclear what is meant by “strictly necessary”. One could argue that disclosure is not strictly necessary until all other avenues have been explored. That could mean the MOD or the GoCo having to place new contracts to replicate past work in order to obtain the same or similar confidential information while securing the necessary rights of disclosure in the new contract. That would increase costs and delay the MOD’s programmes. In extremis, it could be argued that unless compelled by law or regulation, it is seldom strictly necessary to disclose anything to anyone.

Proposed new paragraph 5(5) suggests that, before any disclosure of confidential information by the MOD to the GoCo,

“the individual or business to which the information relates must be notified of the intended disclosure.”

The fact is that DE&S holds very significant amounts of confidential information from many suppliers. Compelling the Ministry of Defence to notify suppliers of every item of confidential information from every supplier before disclosing it to the GoCo would clearly consume scarce resources and add cost and delay to the matériel strategy programme. I suspect that is not the intention behind the hon. Lady’s amendment.

The current provisions in the Bill already provide suitable protection for suppliers of confidential information. The Bill allows for disclosure of confidential information between the MOD and the GoCo and the GoCo’s service providers, where it is necessary or expedient for the purposes of providing a defence procurement service in accordance with the Bill. However, any disclosure or use of the confidential information by the GoCo or its service providers that is beyond the terms of the original obligations placed on the MOD when it received the confidential information will be an unauthorised disclosure or use of that information. The Bill therefore puts the GoCo in the shoes of DE&S in relation to its disclosure and use of confidential information.

If the GoCo misuses such information, the supplier will have cause for action against the GoCo, just as it does now if the MOD misuses the information, either itself or as DE&S. In addition, the contract that the MOD places on GoCo for provision of defence procurement services will include provisions that restrict the use and disclosure by the GoCo of suppliers’ confidential information for defence procurement services for the Ministry unless the MOD permits otherwise. At present, there are 25 pages of clauses in the draft contract that govern the use of confidential material and intellectual property.

We note that the proposed amendment mirrors that creating an offence for wrongful disclosures of confidential information in relation to the single source provisions in part 2. However, that is intended to protect highly detailed supplier information, as I have already said, and not procurement information such as that covered by the current schedule 2. The proposed amendment omits the key aspect relating to confidential information in a single source environment. Schedule 5(1)(1)(c) states that the provisions of schedule 5 that create the offence of wrongful disclosure of confidential information apply to information

“of a kind specified in single source contract regulations”.

The proposed amendment mirrors the provisions in schedule 5 but crucially omits the key limitation to information specified in single source contract regulations. Consequently, the scope of the proposed amendment is very broad and appears to cover any information obtained by the MOD that relates to the affairs of the business or individual. While it would be appropriate to create an offence of disclosure of confidential information for specific information as identified in single source contract regulations, as is done in schedule 5, the creation of a general offence for the disclosure of confidential information, as the amendment appears to propose, is not proportionate.

The MOD and industry have been exchanging confidential information for decades. On the basis that our confidentiality arrangements are adequately covered by confidentiality agreements or confidentiality provisions in contracts, this has appeared to work well for both the MOD and industry. We are not aware of any significant problems that have arisen in that regard. The Bill will extend those confidentiality obligations currently on the MOD to cover the GoCo and its providers when supplier-confidential information is disclosed to them. We should not be creating or extending criminal offences unless absolutely necessary. We judge that the extension to the GoCo of the confidentiality obligations agreed with the MOD for confidential information that the MOD passes to the GoCo offers sufficient protection to the owners of that information.

At this point, and if we are to have an opportunity to consider other amendments later, I urge the hon. Member for Plymouth, Moor View to withdraw her amendment.

Albert Owen (Labour, Ynys Môn)

May I try again to clarify to the Minister that we will be debating them today but not taking a vote on them until we reach schedule 5? If the Minister wishes to carry on, the shadow Minister can then conclude the debate.

Philip Dunne (Conservative, Ludlow)

Thank you, Mr Owen. I shall, in that case.

I turn to amendment 12, which the hon. Member for Plymouth, Moor View has not yet addressed, and I will try to explain what it seeks to do. It endeavours to include, within the scope of the criminal offence of unauthorised disclosure, information disclosed as a result of carelessness. It also seeks to impose a statutory duty on holders of information to take appropriate protective measures.

The amendment would replace schedule 5(2)(1). Proposed new subsection (1)(a) and (c) recreates what was originally there, and proposed new subsections (1)(b) and (2) are new. Proposed new subsection (2) would place a duty on a holder of the information to

“take adequate technical and organisational measures against unauthorised or unlawful disclosure of, and against accidental loss of, the information.”

It is worth noting that officials holding the information will follow the technical and organisational measures laid down by their Departments, such as process and IT systems. Giving them responsibility for those measures, as the amendment seeks to do, seems overly onerous.

Proposed new subsection (1)(b) would make the disclosure or loss of information as a result of failing to fulfil the above duty an offence. I take that to be the principal issue of the amendment. The offence as currently drafted does not specify that the disclosure must be deliberate, but legal opinion is that, should the matter come to court, the need for deliberate intent would be read into the clause, as is the case with most criminal offences. That is because, for the kind of criminal offence we are creating, the default legal principle is that there must be intent for a crime to have been committed. There must be mens rea, or a guilty mind.

The information we will be getting from our single source suppliers is, as I have said, unusual in acquisition processes within private and competitive sectors, in terms of its quantity and detail and the fact that it comes in a standardised form, making it open to analysis and comparison. However, that is not unusual in price-regulated activities. Across all our price-regulated sectors, including water, power, rail and communications, there is a requirement for detailed and standardised information to be provided. The regulators need that information, as we do in the Ministry of Defence, to assess the reasonableness of service providers’ costs and their relative efficiency to ensure the customer gets good value for money. The information received by the price regulators also contains highly sensitive commercial information that, similar to our situation, would be of great value to competitors and market analysts. That information will be held centrally so it can easily be compared and analysed. The price regulators therefore represent a good comparator to the provisions of part 2, in terms of the nature and quantity of the information to which they have access.

In all these cases, the unauthorised disclosure of information obtained under the powers of the price regulator is a crime. However, in no case is release due to carelessness covered, and I am not personally aware of any cases where such information has been released to competitors resulting in substantial damage to the commercial interests of a service provider. This approach appears to work in the regulated sectors, and we see no reason why it should not also apply and work for defence.

In coming to our judgment that carelessness should not be covered by the criminal offence, we also considered general legal principles. Carelessness—or negligence, to use the more precise legal term—is seldom sufficient for an indictable offence. A criminal offence is a serious matter. Apart from the possibility of imprisonment, which would be limited to a maximum of two years under the schedule 5 offence, there is also the subsequent impact of the individual having a criminal record. In our case, where lives will not be threatened by the release of this confidential commercial information, there is no justification for criminalising mere carelessness.

Mark Pawsey (Conservative, Rugby)

I am listening very carefully to the detail the Minister is giving. However, is not the point that if the burdens on contractors become excessive, many will be discouraged from coming forward to tender in the first instance?

Philip Dunne (Conservative, Ludlow)

My hon. Friend makes a valid point. What we seek to do throughout our procurement processes is to introduce efficiency and transparency where possible, and not impose undue burdens on our contractors, which would put up their costs, and therefore put up the cost to the taxpayer. He has made a valid point. If the contractors have to go through the processes proposed by the hon. Member for Plymouth, Moor View to satisfy themselves that they are not risking suffering criminal proceedings in the event of a leak of information, that will inevitably increase the cost the contractor pays—as well as within the GoCo and the Ministry of Defence—and thereby increase the cost of defence, rather than reduce it, which is what we are trying to achieve.

Tobias Ellwood (Conservative, Bournemouth East)

Further to that important point, the burden placed on contractors will differ depending on the size of the contract. Is there a financial line in the sand as to the level of due diligence that will be required for very small contractors compared with the big long-term ones?

Philip Dunne (Conservative, Ludlow)

My hon. Friend makes a useful intervention. He is clearly a doughty champion of small and medium-sized businesses, not only in his constituency but in the sector. Under the amendments proposed, there is no distinction as to size of contract or contractor that would be subject to such onerous obligations.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

Does my hon. Friend also recognise that there would be a significant impact on the skills base as well? In my constituency, that is something that I am very concerned to protect.

Philip Dunne (Conservative, Ludlow)

My hon. Friend raises another aspect that perhaps had not been thought through when the amendments were tabled. There is no doubt that small companies would not have the resource to be able to ensure that they did not put themselves at risk from criminal sanctions, and therefore some of them might choose to withdraw from the defence supply sector altogether, and that would be particularly damaging in the smaller business sector. Many of the maritime specialist companies tend to be relatively small companies—an addition to the major primes—and that might have a particular impact in my hon. Friend’s constituency.

I shall move on to amendment 13. Paragraph 4 of schedule 5 authorises the release of information if it is already in the public domain. Amendment 13 would require that such information must have been placed in the public domain lawfully. Adding that test of lawfulness places another burden of assessment upon the holder of the information subject to schedule 5. Before releasing information that they know to be in the public domain, they would be required to make an assessment as to the legality of the original release. That is potentially a very difficult thing to do. They would have to determine all of the original routes whereby the information was provided to the public, and in each case they would have to assess whether this was legal , which would be likely to require specialist legal knowledge. Given that unauthorised release may result in a criminal offence, this is an unacceptable burden of assessment to place upon the information holder, which, in this case, would be the GoCo.

It is worth noting that just because a release is authorised, it does not mean that the information would be released. It means only that release would not be a crime. Government officials will not proactively release information to the press simply because it has become publicly known.

I have dealt rapidly with amendment 13. Amendments 14 and 15 refer to authorised release of information under the Freedom of Information Act. The Government are firm believers in transparency and freedom of information, which is why we have included a release under the Freedom of Information Act as an authorised release. The Freedom of Information Act places a duty on public bodies to release information that they hold to facilitate greater openness, understanding and transparency around how the Government operate.

However, given that some of the information that the Government receive can be highly sensitive and affects the effective operation of both the Government and business, the Freedom of Information Act, as members of the Committee are no doubt aware, already has safeguards to prevent disclosure that would be detrimental to the overall public interest. In particular, the Freedom of Information Act has two main protections against disclosing information of the sort that we would expect to receive under part 2: namely, information provided in confidence, and information whose release would prejudice the commercial interests of the provider.

Section 41 of the Freedom of Information Act provides an exemption where information is obtained by a public authority and its disclosure to the public by the public authority would constitute a breach of confidence actionable by the person who provided it, or any other person. That is an absolute exemption.

Section 43 provides protections against the disclosure of trade secrets and commercial information which, if released, are likely to be of detriment to a company’s financial or commercial position. This is subject to a public interest test. This demonstrates that safeguards are already clearly built into the Freedom of Information Act to ensure that information is properly protected. As it is today, it will be the responsibility of the person or team who receives or owns this information to judge whether either of these exemptions apply and to consider the public interest test which ultimately has to be approved by a senior civil servant. The proposed amendment would extend the criminal offence to those who have not pursued every available defence under the Freedom of Information Act for not disclosing the information and would criminalise an official who released information under that Act, incorrectly in the view of the courts.

At this point I should assure members of the Committee that we have good processes in place to ensure that we do not inappropriately release information under freedom of information. Where relevant we inform industry where we have a request to release their information and we work with them to determine whether the protections within the Freedom of Information Act are relevant. To date, industry have not been able to provide a single example of the Ministry of Defence inappropriately releasing commercially sensitive data. Making a potential misapplication of the protections of freedom of information a crime goes well beyond the interpretation of the Freedom of Information Act and seems to me to be excessive and too severe. I will therefore be encouraging the hon. Member for Plymouth, Moor View to withdraw the amendment.

This brings me to amendment No. 16. Its effect would be threefold. First, information could only be disclosed, for example across Government and to the single source regulations office, if the disclosure was strictly necessary. Secondly, any recipient of the information would also be subject to the criminal offence if they disclosed it in an unauthorised way. Thirdly, the Government would have to request permission from the individual or business concerned before disclosing information.

The first element of the amendment would require any holder of protected information to consider whether its release was strictly necessary for the purpose to which it would be put by the recipient. That runs counter to the Freedom of Information Act which is intentionally blind to the requester and the motive for their request. If it later transpires that it was not strictly necessary, even if no harm had been done to any party, the person who released the information could be subject to prosecution under the offence. This is not an outcome that I can support. The person holding protected information cannot be held accountable for the use to which a recipient may put information disclosed to them and they cannot be expected to know that this is strictly necessary. All they should be expected to do is to assess whether the person requesting that information is someone to whom disclosure is authorised.

The second element of the amendment seeks to ensure that the protections attached to the protection of information, including the offence, travel with that information when it is disclosed. I agree that this should be the case. Once information obtained under part 2 has been determined to be protected information, it should remain protected no matter to whom it has been provided. However, that element of the amendment is not necessary as schedule 5 already has this effect. Paragraph 1 defines protected information without reference to the holder of the information once it is protected information. It does not cease to be so if it is disclosed to another person. Paragraph 2(1) states that a person commits an offence if they disclose protected information. Again, that does not change by virtue of the protected information being disclosed. The current drafting provides for the travel of the protections to recipients of protected information so, again, the second element of the amendment is not necessary.

The third and final element of the amendment seeks to provide notice to and obtain consent from the business or person to whom the information relates before it can be disclosed. This means that every time a Government official provides information to, say, the GoCo, the single source regulatory office or another Department, they must notify a supplier and give them the opportunity to challenge this disclosure. As hon. Members will quickly realise, that is an onerous requirement.

Julian Brazier (Conservative, Canterbury)

If I may, I should like to underline my hon. Friend’s point. The complaint that one gets time and again from suppliers—particularly smaller ones—is the extraordinary amount of bureaucracy involved in dealing with Government. It is difficult to imagine a provision that would do more to worsen things than the amendment.

Philip Dunne (Conservative, Ludlow)

I am grateful to my hon. Friend, who is extremely experienced in arguing the cause of small companies in his constituency. The burden of bureaucracy in dealing with Government has already been brought to my attention by, I regret to say, all too many MOD suppliers. If they had to comply with the provisions in question, it would undoubtedly add to the frustrations of dealing with the MOD, but also to the time taken and therefore, almost inevitably, to the costs that they would charge to it.

One of the key aims of part 2 is to improve efficiency in single source procurement. As we have just been discussing, a balance needs to be struck between providing protections and not making them so restrictive that they compromise the efficient running of Government functions and the defence industry that seeks to provide our equipment. I do not, therefore, consider that the additional protection is necessary. Protected information can be disclosed only by way of a permitted disclosure under schedule 5. That includes, for the purposes of legal proceedings, all the Government’s own audit functions. It would not be appropriate for another party to limit the Government’s functions in such a way, so I urge the hon. Member for Plymouth, Moor View not to press amendment 16.

Amendment 17 would give the provider of the information an industry body with the power to audit and inspect the technical and organisational measures taken by any part of Government holding the information under part 2. That includes the Ministry of Defence and the single source regulations office, but it also has much wider ramifications, as it includes any other Department given the information, or information derived from it, which could often be the case for the Cabinet office and No. 10.

The hon. Lady’s suggestion is a surprising one. I am not aware of any precedent for an industry to be given audit rights over Government, with Government effectively accountable to industry for performance. My hon. Friend the Member for Canterbury might like to introduce it, but so far as I know it applies nowhere else in Government. The principle mechanism through which the Government are currently held to account is through the work of parliamentary Select Committees—not through an industry body, which would undoubtedly have its own interests foremost in its mind.

The Ministry of Defence is also subject to additional checks and balances. We have an in-house defence internal audit function, reporting to a non-executive director, that is organisationally independent and provides assurance to the permanent secretary and the defence audit committee. That looks at a number of functional areas, including information management. We are also separately subject to external scrutiny provided by the National Audit Office, Her Majesty’s Treasury and, ultimately, Parliament itself. The new single source regulations office would also be subject to internal audits, as stipulated by the Treasury’s internal audit standards, as well as external audits by the Comptroller and Auditor General.

We take seriously industry’s concerns about the need to ensure that its information is adequately protected—particularly the detailed and copious new information that we will require under part 2 of the Bill. The new criminal offence sends a strong signal that we shall do so. I am grateful to the hon. Lady for her amendments, because in resisting them I have been able to explain the Government’s position. I hope I have made things clear. It is not the criminal offence that will protect the information; it is the people and the processes that they use, and the training that they are given. The criminal offence needs to be seen in the context of a wider package of measures that we are taking to protect the information obtained under part 2.

In the process of designing those processes and the training, our intention is that all the information will be provided to a central group of specially trained people. The central database of information will be available only to a select few, and there will be appropriate IT infrastructure and security, such as passwords and fire walls. The information will be passed on only when appropriate. When it is, it will be accompanied by appropriate markings highlighting the commercial sensitivity, the restrictions on disclosure and the existence of the new criminal offence. We are working together with industry through a specially created working group and will be sharing all our proposed processes and training material to make industry as comfortable as possible.

It is not in the interests of the Ministry of Defence, the single source regulations office or Government more widely to release information carelessly. Even one high-profile release will substantially damage reputations and undermine the new framework. The MOD has a good track record of keeping commercial information, some of which is vital to national security, secure. The importance of following security processes is clearly ingrained in the culture of the Department. While we cannot remove all risk, the strong package of measures being introduced will mitigate effectively the risk of careless disclosure.

In conclusion, we take seriously industry concerns about treating information with care and we intend to do that. It is not in our interest to release such information. We will be introducing special processes and training, which will be reviewed by industry. We have a good track record of keeping information secure and the new criminal offence in part 2 of the Bill will provide added focus to Ministry of Defence and single source regulations office employees. Those of the GoCo—if we take that route—will also be under the same obligations to treat information with care. That is how we intend to minimise the risk of unintentional release and I urge the hon. Lady to withdraw the amendment.

Alison Seabeck (Labour, Plymouth, Moor View)

I thank the Minister for his thorough run around the reasons why the amendments are inappropriate or potentially onerous. He is aware that industry and academics were looking hard at the issues prior to the Bill and raised concerns about this area. The Opposition believed it important that the Government were asked to explain exactly what the intention was behind the proposal and whether dangers might exist were certain actions taken.

Our amendments were serious, but largely probing. At the beginning of discussions around the clause and the schedule, we were not sure whether we would need to vote on the principle, as opposed to the specifics of amendments, whether well drafted or not. On balance, we will probably not press any amendments and I will explain the reasons why.

The issues are genuine. With the increase in whistleblowing, which is an option that people sometimes feel that they need to use to get information out there, and the growing problem of malicious release of information, the concerns behind some of the lobbying that we have received—I am sure other Committee members have experienced it, too—about the need to ensure that there is some form of redress if that type of incident occurs are perfectly honest and reasonable.

The Minister set out clearly and with great confidence that legislation such as the Official Secrets Act is in place and ought to be able to deal with any misbehaviour or inappropriate release. He also set out the clear differences between schedule 2 as it applies to the SSRO and to the GoCo and the difference in the level and degree of information that might be at risk. I fully accept that point.

On amendment 12, the Minister mentioned that giving officials additional duties could be overly onerous. He comprehensively set out issues on legal advice and legal opinion, which was useful in enabling us to reach a view on whether that amendment was entirely relevant. He talked about the complex and difficult way in which carelessness could be criminalised, and the potential costs that sit behind that.

Contributions from Government Members, standing up to speak mainly on behalf of small businesses, were entirely appropriate and fully justified. It shows the strength of the Committee process when we have full engagement and people raise those issues. I say to Government Members that the amendments came from concerns expressed directly to us by SMEs. The SMEs were aware that additional burdens potentially sat within the amendments, but both we and they felt that it was important to have a debate about outcomes and criminal behaviour.

Russell Brown (Labour, Dumfries and Galloway)

My hon. Friend is exactly right and I want to add a little more emphasis to her points. Undoubtedly, not only every Member sat on the Committee, but every Member in the House who has an interest in SMEs sees what we are developing through the Bill as a significant step forward.

For some small businesses the Bill is, to some extent, a leap in the dark. They want to be sure that months, if not years, of progress, finance, time, money and effort are not wasted by something that is not tied down tightly. I appreciate the points that the Minister has made. He has given the best answers he can. While my hon. Friend has said that the amendments are probing, they have significant substance behind them.

Alison Seabeck (Labour, Plymouth, Moor View)

I thank my hon. Friend and agree with his analysis of how we have got to this point. As he said, the Minister’s response has been thorough. Defence is an area where there is a lot of cross-party agreement. We do not generally become extremely divisive, and that is not our intention here; we want to tease out points and ask questions. Some of them might seem stupid and some of them are sensible, but if there are issues of concern to people outside, it is important that they are raised, so raise them we will.

On amendments 15 and 16, the Minister talked about the highly sensitive information that the Government receive and share and said that there are protections in place. He talked specifically about some of the safeguards on the release of information through FOI, including the public interest defence.

I accept his robust attack on the proposals in those amendments, and I understand why he would not want to take them forward. It was interesting that he agreed that some of the proposals in the second part of amendment 16 have some validity, but he went on—for my benefit, I suspect—to explain that some of the defences are already in the schedule. I am grateful for that.

It behoves the Committee to probe and dig and ensure that the Minister gives a full and thorough explanation as to why the schedule should stand as it does. I accept his arguments. I beg to ask leave to withdraw the amendment.

Clause 8 - Intellectual property rights

Alison Seabeck (Labour, Plymouth, Moor View)

We move on from disclosure of information to the nature of the information at risk. All of us in this room are well aware of how important IP is to the defence industry—and, indeed, in ensuring that Britain maintains its technological edge in both defence and aerospace.

A company’s IP is perhaps its most valuable asset. Therefore, the ability for that to be exposed, passed on, shared or leaked to a third party or another private company with defence interests has become a major cause for concern, because of some proposals in the Bill. Those proposals are not just about the Secretary of State providing protected work—whether owned by the MOD or a private company—to the contractor or service provider; it is about the contractor or service provider then having permission potentially to supply that protected information to yet another person or persons. The proposals also allow for information made available under a different set of rules—in other words, before the vesting date when the GoCo is established—also to be passed on.

I have a problem with the transfer of historic data, which was offered to the Secretary of State in the certain knowledge that it was not to be passed on, through what will be potentially three sets of hands. Yet the Bill allows that information, which was originally expected to be passed only from the contractor to the MOD, or vice versa, now to wing its way through a number of other interested parties. Those private hands potentially have conflicting interests. We all heard from industry that these proposals will not please many companies. Opposition Members have deep reservations about conflicts of interest, as we pointed out earlier. Although those arguments were not successful earlier, they are pertinent to the discussion of the clause.

Retrospectivity means that the ground rules are different. Could the Secretary of State face challenges, for example, from firms about disclosure of information to the GoCo when the original contract with the MOD had no mention of any extra private interests, such as a GoCo, having access to their information? Where are the protections in place specific to the individuals employed by the GoCo and the risk, for example, that if they were head-hunted out of an organisation—we touched on this earlier—they could take valuable soft and hard IP knowledge with them? The Minister earlier said that that happens all the time, but this is a new set-up. Companies out there are expressing concerns and we should pay heed to those.

We previously debated head-hunting and how difficult it is for the MOD to keep hold of its talented staff. That brings us back to concerns about exactly what they can take with them. The Minister allayed some of those concerns on the lack of legal penalties for those infringing IP laws in our discussion on the previous schedule. I would like, however, some reassurance about how the spread of IP will be prevented in regard to this clause.

We talked about copyright infringements and data protection. In the witness sessions, the Minister tried to suggest that concerns voiced by industry and academia were unnecessary. Hard IP is simpler to understand, but I am still unclear about how soft IP can be protected: knowledge gained in the process of the GoCo about, for example, how a company might run a successful bidding campaign.

In addition, we need to be clear about intellectual property rights and the MOD’s internal problems at the moment in that regard. The MOD is attempting to sell the Defence Support Group. There was a consultation in August, designed to ensure there were no ongoing IP conflicts.

Sir David Amess (Conservative, Southend West)

I should explain to colleagues that I am making a guest appearance this afternoon, standing in for Graham Brady. I have also been advised by the Minister that a note from the Ministry of Defence, MSU/48/16, has been tabled and is available for Members. We now continue our line by line consideration of the Bill.

Alison Seabeck (Labour, Plymouth, Moor View)

It is a pleasure to see you in the Chair, Mr Amess, albeit as substitute, but substitutes are always welcome.

I had begun to talk about the Ministry of Defence’s interest in selling the Defence Support Group and the consultation that started in August this year, which was designed to ensure that there were no ongoing conflicts with regard to the intellectual property used by DSG in carrying out its business.

In this instance, industry IP is handed over to DSG to allow the company to undertake some highly specialised work, on vehicles in particular, and is clearly moved into incredibly safe hands at DSG. That IP and its transfer have been the subject of industry concern, which is in part relevant to the clause. Industry is concerned about who gets control of a potentially large amount of IP that, previously, no one expected to be released to commercial rivals. That takes us back to the issue of retrospectivity.

An MOD spokesman—commenting when the audit was announced in the contracts bulletin, which aimed to establish who in industry objects to their IP being handed over to the new DSG arrangements, ahead of any negotiations to resolve individual issues—said the Department has

“been engaged on IP work for a long time… and we are still working to resolve the issue and deliver a successful sale in… 2014-15”.

I understand that there has also been some discussion specific to DSG about whether certain elements of it—Sealand and Stafford, I think—should be declared out of scope and a completely separate entity set up to deal with the most sensitive IP information that they work with.

Putting aside the issue of whether that is a sensible thing to do with DSG, there clearly are unresolved concerns within the MOD about how to handle it. That being the case, it is questionable why we are being asked to allow the clause through when the MOD does not appear to have got its head around how to handle a smaller amount of IP linked to the possible sale and movement of DSG to the private sector. Here we are talking about a group of people who work on projects as sensitive as Typhoon, and who could well be working on the F-35 when it enters service.

We do need an answer from the Minister on the potential time scale issues raised by the quote from the MOD spokesman, because it seems to suggest that this is likely to be an extremely long process. How quickly will the negotiations on the transfer specific to the GoCo be achieved? Can they be achieved before we get to the next general election?

What about protections for the GoCo itself? Suppose it developed a hypothetical internal system—IT perhaps—that proved to be the best thing since sliced bread, but which applied specifically to MOD working. Who would own that IP if the decapitation outlined by Bernard Gray, Chief of Defence Matériel, took place and the new company was set up? Would it have any rights to that hypothetical amazing IT system, or would the MOD have to buy back the system at a cost if it decided to take it back in-house or to bring in another contractor? Would the MOD own it by dint of contractual arrangements that will be set in place? Or, could there be a legal wrangle, with both parties claiming ownership? I would be grateful if the Minister answered those concerns about how IP will be developed within the system.

We have heard that two contractors could be running at the same time. Would one be expected to share its expertise and IP with the other? I assume, again, that such matters will probably be enforced through contracts, but I see nothing in the Bill that clarifies that. It is also unclear as to whether—say, after the nine years of the new consortium being chosen as the preferred contractor—there will be a right of transfer of protected information and work to the new contractor. Might there be a circumstance in which the old contractor is reluctant to pass on information to the new one? If that happened, would there be potential for acrimonious legal wrangles for the Secretary of State?

Those are all genuine questions that I hope the Minister will answer. I am particularly interested to hear about the time scale and concerns as to what seems to be happening at DSG.

Russell Brown (Labour, Dumfries and Galloway)

I shall be brief. Prior to the break, at clause 7 I mentioned the investment that companies have made over long periods to reach the position they are in. Their product and the associated intellectual property have come at great financial cost. I appreciate that we are discussing clause 8, not clause 7, but some of the arguments are relevant, and it is clear from the Committee’s first sitting, when we took evidence, that there are issues here.

I know that the Minister has given some reassurances, but I have taken the opportunity to look at the standard note from Library. The research paper says quite clearly:

“Clauses 7 and 8 take rights away from the disclosing party or copyright owner without any right to objection and without compensation.”

It goes on:

“ADS has serious concerns about the proposed provisions in Clauses 7 and 8. We recommend that, in the case of copyright, the existing Crown user rights under the IPR DEFCONS should be preserved. Clauses 7 and 8 should therefore be removed from the Bill.”

That is obviously not happening, so the Minister and the Government should give reassurance not only to the Committee and the House as a whole, but to businesses, especially small and medium-sized enterprises, which are the lifeblood of many small rural economies. I know that the Minister has done his best to give the reassurances that we need, but I still have niggling fears in the back of my mind about something going wrong despite those reassurances—after all, we are discussing legislation.

For small companies in particular, something going horribly wrong and rights not being protected could take a business to the wall at the drop of a hat. That business might have been in the family for two or three generations, but if it went to the wall it might take 10 or 15 jobs with it—who could tell?

I want to put that on the record. I am not sure whether the Opposition will vote against the clause, but this is about business and people’s livelihoods. We cannot give enough assurances to businesses, especially small businesses, on the absolute certainty that their intellectual property will be protected at all costs.

Philip Dunne (Conservative, Ludlow)

It is a great pleasure to see you, Mr Amess, standing in for one of our appointed Chairs, and we are pleased that you have resisted the temptations of a one-line Whip, which would have made you unavailable. I hope that we make it worth your while. I will address the hon. Lady’s specific questions, but before I do so, I would like to explain briefly the purpose of the clause.

The clause is essential because, without it, the use of intellectual property by the contractor could be unlawful. It will put appropriate safeguards in place to prevent the unauthorised use or disclosure of that intellectual property by either the contractor or its employees.

The clause is concerned with copyright works and databases in which a database right subsists. There are, of course, other types of intellectual property right, of which patents and design rights are the most familiar, but there are statutory provisions, such as the Patents Act 1977 and the Copyright Designs and Patents Act 1988, that allow for the use of those by the Crown, or by contractors on behalf of the Crown, without needing permission from the owner of the intellectual property.

However, there are no statutory rights of Crown use for copyright works, which include reports and software such as those procured by DE&S. It is therefore necessary to include the clause so that the MOD can lawfully provide copyright and database works to the contractor where the MOD has secured the rights to use such works itself and where it is necessary and expedient to provide the work to the contractor for defence procurement services. If the clause is not included, provision of copyright and database works to the contractor by the MOD will risk infringement of copyright and database rights in such works.

Many of the provisions are similar to those we discussed under the previous clause and the concerns about protecting confidential information are similar to those referred to by the hon. Lady and the hon. Member for Dumfries and Galloway. I therefore refer the Committee to remarks I made earlier today on how we go about protecting such information.

The hon. Lady asked, by way of an example, whether we will be able to protect against the material being taken out of GoCo’s control if individual employees are head-hunted away to work for contractors, taking IP information with them. They will be subject to the same restrictions on the use and theft of confidential information as under the previous clause, which will catch them.

The procedures in DE&S, which we would continue to have in the GoCo, are, we believe, adequate to resisting the theft of information, and have proved to be so. One can never be absolute in such matters—if someone has malign intent, they might find ways around the procedures—but that is the situation in which we find ourselves today. We do not believe that the Bill or the establishment of a GoCo increases that risk.

Before the break, the hon. Lady also asked about how we protect “soft” IP, such as the know-how that a manager in DE&S might develop on the procurement procedures used by a particular company to succeed in winning contracts. Were they to leave DE&S, they might be able to transfer that knowledge or know-how to another employer. What would happen depends on the circumstances in which the transfer took place. If it was through the theft of material, and it could be established that that was what had happened, the person would be caught under the provisions we discussed earlier. If it was merely an understanding from having worked in one environment that was then developed in another, that could not be precluded by statute—that is the commercial world in which we live.

Alison Seabeck (Labour, Plymouth, Moor View)

Can the Minister address a concern I have? We are talking about people moving within the UK, but how would the behaviour of somebody who retains that sort of knowledge be monitored if they were to move from the UK to, say, Brazil, China or anywhere else abroad? They could use their IP knowledge in a way that is detrimental to UK interests.

Philip Dunne (Conservative, Ludlow)

That is an interesting question. Of course, this legislation applies within the UK. The provision will not apply to intellectual property obtained though contracts entered into under foreign law. Treaties and memorandums of understanding with other Governments are outside the legal jurisdiction covered by the Bill.

The hon. Lady’s question was, if a former employee of DE&S in the UK were to work in another country, what remedies are available to the Government, the Ministry of Defence or individual contractors who feel they have suffered loss to pursue that individual? It would depend on the nature of the offence that is committed. If it is one that could be pursued under the Official Secrets Act, we have extradition arrangements with other countries that we could enforce. If it is theft of commercial information that damages another country, it would be down to the contractual arrangements, which exist today. There is no distinction between the risk of that happening under a GoCo and it happening under the DE&S today; the risk is already there. As I said when we discussed these problems on Tuesday, we are not familiar with that sort of offence occurring in the past. That is not to say that we can preclude it from happening in the future, but we do not anticipate that it will.

The hon. Lady also asked whether the example of establishing the IP protections surrounding the DSG sale is instructive. I am glad she raised that issue, because it highlights the importance of IP in allowing the Ministry of Defence to ensure its equipment is maintained and serviced to support our armed forces. I am sure, Mr Amess, you will allow us to digress down this track, because it is relevant to the issue of intellectual property, which is covered by the clause. The Defence Support Group has responsibility for maintaining and overhauling vehicles—tracked vehicles, primarily—for use by the British Army. Many of those vehicles in support rely on intellectual property from the original equipment manufacturer—the OEM—which in most cases is BAE Systems. DSG operates under licence from BAE systems, so it has access to the source code and data relevant to those vehicles.

I will use an analogy to put this issue in context. A tracked vehicle—say, a tank—is a platform for use by the Army. It is analogous to a surface ship or a submarine, which are platforms in use by the Royal Navy. Surface ships and submarines, as hon. Members know, are subcontracted out to companies that are not exclusively the OEM suppliers of those platforms. Therefore, it is common practice across the services to enter into live support relationships with third-party contractors that are not necessarily the OEMs, which therefore have to enter into agreements with the OEMs to get access to their IP. That happens today across the services. It does not happen at the moment in relation to DSG because the sub-contract licensee is the MOD through DSG. If the licensee were to change to a third party that is not the OEM, a new relationship would have to be established for that party to benefit from a licence from the OEM.

The situation is entirely analogous to what happens in the air and maritime domains. It is taking a bit of time simply because these things do. It took time to get such arrangements sorted out in other domains. We do not anticipate that that will interrupt our programme to prepare DSG for sale. It is simply one of the many things that have to happen in the course of preparing a business for a change of control.

Alison Seabeck (Labour, Plymouth, Moor View)

I thank the Minister for allowing me another intervention. A consultation is under way about the potential sale of DSG and the movement of IP within that. What is the time scale for that consultation and will the responses from business be made public?

Philip Dunne (Conservative, Ludlow)

Is the hon. Lady referring specifically to DSG?

Alison Seabeck (Labour, Plymouth, Moor View)

Yes; specifically, there is a consultation.

Philip Dunne (Conservative, Ludlow)

The hon. Lady refers to the sale process for the Defence Support Group and the consultation that will take place surrounding that. At this point, the consultation is pending decisions about the sale process; there is an established route for informing employees through their trade union representatives about how that process is developing. If that is the consultation she is referring to, it is an informal rather than a formal one.

Alison Seabeck (Labour, Plymouth, Moor View)

Perhaps I can be a little clearer. An audit, which was announced in the contracts bulletin, aims to establish who in the industry objects to their IP being handed over to the new DSG, ahead of separate bilateral negotiations to resolve individual issues. I misnamed it by calling it a consultation. It would be helpful to know whether the industry responses to that audit will be made public.

Philip Dunne (Conservative, Ludlow)

The hon. Lady raises an interesting point. As part of the sale process, we have sought to make it possible for any OEM that believes it has IP in use within the DSG to draw that to our attention. We are aware of the ones that we are aware of, and we are in dialogue with them. We might not necessarily be aware of those OEMs that think they have IP within the DSG—that is an unknown unknown. I will take away her question about what we intend to do. I anticipate that the responses will not be made public, but I will get back to the hon. Lady on that point, in the context of the DSG sale.

If I may, I shall return to the clause; I know you are keen for us to get back to it, Mr Amess. The hon. Lady asked what would happen in the event of two contractors being involved in the GoCo, perhaps managing different domains, and what will happen with IP on transfer of the GoCo contract at its end. She also asked who would own the IP if a decapitation eventuality interrupts a contract. The IP is owned by the OEM—the prime contractor or subcontractor whose IP it is. The Ministry of Defence is licensed to use the IP as part of the contract for purchase of and subsequent support for the piece of equipment to which the IP relates, and that will continue to be the case.

If licences are held within a GoCo environment, they will be held at the operating company level. The hon. Lady will recall that it is the operating company over which the Secretary of State retains the ability, through the use of the special share, either to claw that business back into the MOD or to transfer it on to another party. Were the ownership arrangements of the management company to change, all the IP licences would be held within the operating company and it would therefore be within the power of the Secretary of State to transfer them in any of the circumstances that she mentioned.

I have addressed the specific questions asked by the hon. Lady and the hon. Member for Dumfries and Galloway. Moving on, subsection (1) enables the Secretary of State to provide a “protected work” to a contractor or its service provider without infringing copyright or database rights. Subsection (2) enables contractors or service providers to provide such works to each other and to the Secretary of State without infringement. The subsection also allows for a provision of the works to and from former contractors, to allow for the provision of such works in the event that the Ministry of Defence decides to change the contractor for defence procurement services, which we have just been talking about. Subsection (3) allows for the use of such works by the contractor or its service providers without infringing those rights.

The issues surrounding intellectual property were the subject of considerable interest on Second Reading, and, as the hon. Lady has pointed out, defence industry contractors have raised concerns about them with us. The Government intend that the contractor will receive only the copyright and database work that it needs to deliver the defence procurement services required by our armed forces, and that the contractor will not use them for any other purposes without the permission of the Ministry of Defence. The contract that the Ministry of Defence places with the GoCo contractor will include specific provisions to that effect.

I can assure the Committee that every possible precaution is being taken to ensure that the transfer of DE&S to a GoCo contractor would not compromise the protection of information or our relationships with either international partners or our commercial suppliers. The contractor will have access only to intellectual property that is required to carry out its obligations under the contract. The contractor will only receive and have access to information and intellectual property in relation to contracts that are in its scope under the contract. Information and intellectual property that is outside the scope of the contract, or that the Ministry of Defence determines the contractor will not need, will be retained by the Ministry of Defence. Further protection will be placed in the contract itself. The contract will place conditions of use on the contractor in relation to the access to and use of third party confidential information and protected works supplied after vesting day.

Tobias Ellwood (Conservative, Bournemouth East)

Can the Minister confirm whether existing arrangements would be transferred, were the GoCo to move forward? In cases where extremely sensitive information is involved, there are “British eyes only” rules that apply. Will the same process be continued in the contracts relating to GoCos?

Philip Dunne (Conservative, Ludlow)

I am pleased that my hon. Friend has referred to the existing security and vetting arrangements and has sought confirmation that those will be deployed in relation to a GoCo contractor. I can confirm that it is absolutely our intention to do so. I do not know whether the Committee would be interested in a summary of some of the vetting arrangements—[ Interruption. ] I note that some members of the Committee are interested, so I will find my relevant notes. This issue is relevant to the way in which the clause might operate.

As my hon. Friend the Member for Bournemouth East knows—I suspect he has been party to some of this, given his distinguished service for his country—we have four levels of MOD personnel security controls currently available, which depend on the level of assurance required. There is a baseline personnel security standard, which was previously known as the basic check. We have a counter-terrorist check at the next level. Above that, we have a security check, and above that, for the most sensitive material, we have developed vetting.

The baseline standard is not a national security clearance, but it aims to provide an appropriate level of assurance as to the trustworthiness, integrity and probable reliability of prospective employees. That applies to anyone who is coming to work for the MOD.

Tobias Ellwood (Conservative, Bournemouth East)

I beg your indulgence, Mr Amess, but I hope the Minister will agree that while there are certain circumstances where “British eyes only” is appropriate, the strength of our relationship with the United States has enabled quite a unique set of parameters to develop that allows the sharing of information in this context which is second to none.

Philip Dunne (Conservative, Ludlow)

My hon. Friend is absolutely right. We have very well established procedures, tested through both a “UK eyes only” and “UK/US eyes only” process, which apply to information that can be shared between UK personnel and US personnel. We are probably one of the most advanced nations in the way that we undertake vetting procedures of our personnel, security-mark material and protect security-marked classified material to ensure that it is accessible only to people who have the suitable level of vetting. We anticipate that this would apply within the GoCo just as it applies within DE&S.

Just to reassure hon. Members, at the most basic level of security, we are looking to verify four main elements: first, identity; secondly, employment history going back three years; thirdly, nationality and immigration status; and fourthly, a criminal records check, checking for unspent convictions only. Anyone seeking to work for the Ministry of Defence and any of our agencies is required to give a reasonable account of any significant periods—six months or more in the last three years—spent abroad.

While further inquiries such as into health status may be undertaken, those are not necessarily part of the baseline standard. This is required for all recruits into the civil service, including casual, temporary and work-experience staff and for contractors’ employees where those employees need unsupervised access to confidential material of UK origin or unsupervised access to the MOD estate.

The basic vetting seeks to ensure that all new staff are entitled to work in the UK and where appropriate meet nationality rules for Government service, to guard against the employment of anyone posing as a prospective employee for commercial or personal gain and to provide a sound basis for any subsequent national security vetting check. This should be sufficient to allow access to UK assets protectively marked confidential and occasional access to secret assets of UK origin during the normal course of business or during conferences or courses. A number of supplementary checks such as into any spent convictions as part of an individual’s criminal record and/or their creditworthiness are also available for specific posts where appropriate.

That is the level of background checking undertaken for the most basic entry level into the MOD and we would envisage that that would apply for GoCo employees as well. I do not propose to go into the higher levels of security vetting in detail here as that might expose them in a way that is not required by this Committee. I can assure members of the Committee that they are significant and taken most seriously.

Alison Seabeck (Labour, Plymouth, Moor View)

May I seek some assurance? While the Minister has been thorough in running through the different tiers, if an expert is employed from somewhere outside the UK where it is not possible to carry out some of those basic security checks, how will that be managed? Will they simply not be allowed to have any access at all?

Philip Dunne (Conservative, Ludlow)

The main operating base of DE&S is in the UK. There are DE&S personnel within operating bases around the country and in some operating bases abroad. So there are, for example, personnel at our bases in Germany and Afghanistan. We do not routinely have cause for having procurement personnel located in other countries. Having said that, there are some personnel located abroad, primarily in the United States.

We made reference earlier to the joint strike fighter programme, which probably has the largest concentration of personnel from DE&S. Elsewhere, there are others in the deterrent programme. They are all recruited, as far as I am aware, from a UK base and deployed for specific purposes.

Kevan Jones (Labour, North Durham)

Will the costs of vetting and ensuring that these individuals are of suitable clearance still fall on the taxpayer, or will that be the GoCo’s responsibility? Whose job will it be to monitor the security status of individuals who have access? Will that be the MOD or does that fall on the GoCo’s self-regulation?

Philip Dunne (Conservative, Ludlow)

The hon. Gentleman is tempting me to stray into areas of personnel management that I am perhaps not best equipped to cope with. My understanding is that the MOD pays for the security vetting procedures that it requires for an MOD or DE&S employee. Clearly, if security vetting requirements are imposed on our contractors, it will be for the contractor to pick up the cost of the vetting.

Kevan Jones (Labour, North Durham)

That was as clear as mud. I understand that the Minister does not know the answer, so I would be happy for him to write to us afterwards.

Philip Dunne (Conservative, Ludlow)

I am very sorry to have disappointed the hon. Gentleman with my lack of detailed knowledge about employment practice within the MOD. I will be happy to put that right by writing to him.

On the hon. Lady’s point on the status of individuals who might be working abroad, in the event that we are not able to achieve the security status vetting procedure, for whatever reason, they do not get the clearance and therefore do not get access to the relevant material.

You will be relieved, Mr Amess, to hear that I have almost concluded my remarks on the clause. I will do so by saying that the GoCo contractor, if we go down that route, will be required not to disclose intellectual property rights to third parties and not to use those rights for purposes other than for Ministry of Defence contracts without the express permission of the Ministry of Defence. With that reassurance, I hope that the hon. Lady will support the clause.

Alison Seabeck (Labour, Plymouth, Moor View)

The Minister was good enough to offer a detailed explanation of a number of the issues specific to the clause. We did move a little off piste, to be honest. He reiterated the extremely close relationship between the US and the UK on the management of highly sensitive information, which is well understood by every member of the Committee. He said that it is anticipated that that will continue under the GoCo, which brings us back to our continuing concern that, despite the history, there is still a degree of uncertainty on how the GoCo will work with our allies in the United States.

The Minister also talked about how the GoCo will be licensed to use IP. He talked about the complexity of transferring IP and how the move from the MOD to a private entity is being managed, but there is a lot of fuzziness and a number of grey areas. There are concerns about the time scale, all based around the issues specific to DSG and their potential impact on the GoCo. For example, the audit is under way and the Minister straightforwardly said that he would come back to me on how that was being managed specific to DSG. While that type of audit was held in relation to DSG, seeking views specifically from some of the prime contractors, there seems to be no facility or scope for a similar sort of process to be managed in relation to GoCos, where a similar sort of transfer—admittedly, with slightly different information—will go ahead. Therefore, on a matter of principle, we want to vote on the clause.

Clause 9 - Transfer of employees: application of TUPE regulations

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss new clause 1—Transfer of employees (relocation)—

‘Employees transferred to a company by virtue of arrangements mentioned in section 1 may not be required to geographically relocate outside of the UK without full and proper consultation.’.

Philip Dunne (Conservative, Ludlow)

The new clause, proposed by the hon. Member for Plymouth, Moor View, gives us an opportunity to discuss some of the employee transfer arrangements proposed in the Bill. I welcome that opportunity, although she will not be surprised to hear that I am not persuaded of the case for the new clause.

I believe strongly in protecting the interests of transferring employees in the event that the new company should decide to relocate some or all of the services outside the UK. However, I will resist the inclusion of the new clause because I do not think it is necessary. Those employees transferring to the GoCo are sufficiently protected by current UK employment legislation in this context; accordingly, there is no requirement to include this provision in the Bill.

Hon. Members will recall the note on the Transfer of Undertakings (Protection of Employment) Regulations 2006, which I provided by way of reference earlier this month, which explain the protections that those regulations afford to transferring employees.

For those who do not have that with them, or have not got that at the top of their mind, in summary the TUPE regulations protect employees if the business in which they are employed changes hands, or the services that they provide are to be provided by another organisation. Their effect is to transfer employees, and any rights, powers, duties and liabilities associated with them, from the old employer to the new employer. That includes any rights specified in their contract of employment, statutory rights and the right to continuity of employment.

In addition, the new employer cannot change the terms and conditions of employment of transferred employees if the sole or principal reason for the change is the transfer. That is also the case where the sole or principal reason is connected to the transfer unless there is an ETO reason for the change, usually requiring a change in number of the work force. That often makes it difficult, if not impossible, for new employers to amend terms and conditions of employment of staff immediately after a TUPE transfer.

The Bill makes clear and explicit that the TUPE regulations will apply to the employees transferred to the company, which will have the effect of protecting the employees’ terms and conditions of employment in place at the point of transfer, as well as representational rights. The terms of employment that will be protected include any obligation with regard to mobility of place of work.

Civil service terms and conditions of employment generally contain a mobility obligation, both within the UK and abroad, for all but the most junior grades. Some of the employees who transfer to the GoCo will have on previous occasions relocated for work-related reasons, both within the UK and abroad, throughout their careers in the civil service.

Any proposed change of work location would be subject to general employment law constraints, which require that any enforcement of a mobility obligation must be fair and reasonable, dependent upon the personal circumstances of the individual concerned. I would add that it is one of the attractions of working in the Ministry of Defence that there is an opportunity to work outside the UK from time to time for those individuals who have the right skills and aptitude. We find that quite helpful as a recruitment tool.

Hon. Members will be aware that the Government recently published their response to the consultation on the TUPE regulations and that the amendments that will come into force in the spring of 2014 will not have a detrimental impact on the employee. Further to the protections afforded to employees by the TUPE regulations, part 4 of the Information and Consultation of Employees (ICE) Regulations 2004 places a general obligation on employers to provide information to and consult employee representatives.

Consultation is the process whereby management and employees or their representatives jointly examine and discuss issues of mutual concern. It involves seeking acceptable solutions to problems through a genuine exchange of views and information. The consultation does not remove the right of managers to manage—they must still make the final decision—but it does impose an obligation that the views of employees will be sought and considered before decisions are taken.

To comply with their obligations under the ICE regulations, employers must provide relevant information to and consult employee representatives on all matters in relation to three specific points. First, recent and probable development of the undertakings, activities and economic situation; secondly, the situation, structure and probable development of employment within the undertaking and on any anticipatory measures envisaged, in particular, where there is a threat to employment within the undertaking; and, thirdly, decisions likely to lead to substantial changes in work organisation or in contractual relations.

The information must be provided at such time, in such fashion and with sufficient content as are appropriate to enable the representatives to conduct an adequate study and prepare for consultation. Any consultation must be appropriate in timing, method and content, and conducted with a view to reaching agreement on decisions within the scope of the employer’s powers. In other words, the employer must ensure that any consultation that is conducted must be meaningful and commensurate to the change being consulted on.

For example, if an employer were planning to move current premises to a new building, say half a mile down the road, with no effect on working practices or work force numbers, it could be deemed that the impact of the change would be minimal and, accordingly, a minimal period of consultation of a few weeks would be appropriate. However, if the proposal were to relocate to new premises far removed in the UK, or even abroad, that would have a significant impact on the work force and a period of months would probably be deemed more appropriate.

In summary, established UK employment legislation provides the required protection to the employees that the proposed new clause seeks to achieve. I, therefore, ask the hon. Lady to withdraw it and to support the existing clause.

Alison Seabeck (Labour, Plymouth, Moor View)

Clause 9 relates to the potentially complex process of transferring a significant number of employees from the civil service within the MOD to a GoCo, should it be the preferred option, via the TUPE regulations, which the Minister has gone through at some length.

I will come to the new clause at the end of my notes and speak briefly about it. I would like to set down some of our concerns about clause 9 itself. We have all had the opportunity to read the written evidence supplied to the Committee by the trade unions. They have concerns that, under the TUPE regulations, the transfer of public sector workers to the GoCo, along with newly employed staff taken on by the GoCo using private sector flexibilities, has the potential to create a two-tier work force, where some employees have differing pay, terms and conditions. No doubt that will hinder progress on improving morale among former DE&S staff, which is currently rumoured to be low following the hollowing out of the Department.

The Public and Commercial Services Union and Prospect have both expressed only lukewarm support for the GoCo proposals, and the PCS feels that the risks inherent in transferring its members across to a GoCo are too high. However, it should be said that some of its members, currently feeling demoralised within DE&S, might be feeling that a GoCo could breathe fresh air into the work they undertake with great skill to support our armed forces. I am sure that all the unions could give examples to highlight staff shortages in key areas, the cost of neglecting skill sets, and the impact on what is basically a sound organisation’s ability to recruit, develop and reward specialist staff.

Prospect currently has 2,000 members in DE&S, and the PCS has about 12,000 members across the whole MOD. We know that the Secretary of State accepts that there has been a gradual erosion of skills and capability in the organisation. His view, which appeared in the August 2013 issue of Desider, the in-house magazine for DE&S, is that that

“cannot be allowed to continue if we are to ensure the MOD’s ability to deliver equipment to the front line.”

The movement of staff across to the GoCo and the retention of some to work in the teams supporting the services—the requesters and the governor—need to be incredibly well managed to ensure that there is no imbalance and that the appropriate skills capability is preserved in each of the levels in which it is required. That goes back to our long discussion about clause 1.

The risk of a two-tier work force is real because of the ability of the new contractor to bring in new recruits to the operating company with different employment contracts. We have been digging and found that, rather oddly, DE&S is already recruiting people and using, to a limited degree, higher starting pay as a carrot, enabling them to leapfrog existing staff. Yet existing staff who are successful in applying for posts are deemed ineligible to benefit from the enhanced pay. I do not know whether that will be remedied by the transfer of staff to the GoCo—could it be exacerbated? I think that staff will be interested to know how the Minister sees that situation going forward.

We also need to hear whether the Minister foresees a potential situation whereby, if the GoCo was subsequently brought back in-house, any staff who benefited from better terms and conditions under the private sector would be transferred back to DE&S on the same terms and conditions, or transferred back to their current terms and conditions, which might be less favourable. I would be grateful for clarification on how bringing staff back in-house or transferring them on to another contractor might be managed, because the Minister, the Secretary of State and others have repeatedly held up the fact that the whole thing could be brought back in-house if the GoCo did not work. People need to understand how that would work for the staff.

The Bill also fails to clarify the status of military officers in DE&S and their place within a GoCo. Siren voices have rightly or wrongly said that one of drivers for the GoCo option was reducing the number of military officers involved in procurement. There have of course been issues specific to the length of their rotations, which, to be fair to the Government, the CDM has sought to remedy. The question is not strictly within the realms of TUPE rules, but does relate to the use and transfer of military personnel to the GoCo, and it needs clarification because they are part of the bigger picture of the skills mix that must be transferred across. The impact assessment for military personnel in the operating company suggests that they will not be employees of the contracting entity or the operating company. Could the Minister please clarify that? I know that it is slightly outside the remit of the TUPE transfer, but it would be useful.

Finally, pension schemes and the responsibility for their associated costs will be particularly relevant to the MOD if it needs to transfer people back in-house and finds that the cost of the pension scheme has risen in the interim due to the much-vaunted enhancement of terms and conditions that is apparently likely to occur in the GoCo. Liability to the MOD could change and the Minister’s view on that could be useful. What is planned at the moment? Will employees take the new deal being designed for the principal civil service pension scheme with them into the GoCo? Does the Minister intend to renew the code of practice for staff transfers, which was signed by the MOD, the Defence Manufacturers Association and the CBI, and apply it to the GoCo?

Will the Minister set out clearly what type of restrictions might be applied to the freedoms and flexibilities that the operating company is likely to receive? The impact assessment makes a big play of the importance of those flexibilities, but will any restrictions be imposed in the contract? Will the contract insist on a training requirement, because it is not set out in the clause? If there is an additional need for training when staff are moved around by the GoCo, will that happen?

Quickly returning to new clause 1, the Minister is right that it was probing and intended to tease out how much flexibility the GoCo would have and whether staff would receive any protection, given the global nature of the GoCo consortium members, the bases and other functions of the DE&S, if they felt that mobility was unreasonable. I fully accept that many people join that element of the civil service in the MOD simply because there is the exciting possibility of mobility, but we need to ensure that that is covered.

Kevan Jones (Labour, North Durham)

May I begin by saying what a pleasure it is to serve under your chairmanship, Mr Amess? I wish you all the best in the forthcoming election. Having served under your chairmanship before, I know that people will certainly not need hearing aids in the Chamber when you are in the Chair.

Clause 9 covers the transfer of employees and the protections given to them. It is welcome to see a Conservative Minister supporting the TUPE regulations, which stem from a good piece of European legislation. I was a full-time trade union official when they were introduced and brought some of the early cases. I remember the Conservative party of the time vigorously opposing the proposals as though it would be the end of the world for British business. I hope that the Minister can assure us that TUPE regulations will not be in the Prime Minister’s much-vaunted renegotiation of European legislation and will not be removed. We will have to wait and see.

TUPE regulations have clearly been important when Government contracts have been moved to the private sector, but I must say that they have limitations. The first limitation is the duration of the protection for employees. It has been quite common in many outsourcing situations for a company to take over a group of employees and protect them for the necessary 12 months. Then, lo and behold, we see either redundancies or new contracts being issued to employees. I understand Prospect’s and PCS’s concern that the protection for many of their workers will be only temporary. I can also understand why, as my hon. Friend the Member for Plymouth, Moor View said, morale is low at DE&S, given people’s concern about knowing where they are going to be.

There is another issue that, again, might be a boring human resources point—a personnel point in the old days, when I used to deal with it. I am thinking of the two-tier work force. It is quite clear what will happen if people transfer over on present civil service conditions. New employees will enter the organisation not on the same terms and conditions. I suspect that the organisation will be looking for ways to save money, which were referred to the other day. The key way of doing that is not taking the Community Secretary’s view of saving paper clips, turning lights off or getting rid of pot plants, but getting rid of people, because people are the key driver of costs.

We could therefore end up, quite quickly, with a two-tier work force—or even a three-tier work force, if we have Crown civil servants and military personnel in there as well. They will be on different terms and conditions from the individuals we are discussing, plus the new employees of the GoCo.

Philip Dunne (Conservative, Ludlow)

Will the hon. Gentleman clarify his comments? I am confused as to whether he is advocating that the best way to introduce efficiencies into a GoCo is to sack people.

Kevan Jones (Labour, North Durham)

No, I am not, but if we are realistic and honest, one of the key cost drivers is people. If the GoCo is to save money, it can do that by only two ways—either getting rid of people, or driving down terms and conditions of employment. Those two mechanisms will, I think, be used by the GoCo to ensure that the efficiencies are achieved.

The Government ought to be honest in acknowledging that point, not only in the public debate, but to existing employees. I have met some of them; I am sure the Minister has as well. Some have served long careers in the procurement system and have done sterling work. Treating them in this way is not correct. Regarding loyalty to the organisation, some people, if they are of a certain age, will leave the organisation. That will lead to the problems that have occurred in some of the other reforms that have taken place in the MOD.

I know personally that the Department is losing good people with good historical knowledge of the Department. That is leading to—how can I put this politely?—difficult implementations of certain policies in the MOD. To use a more vulgar term, it is leading to cock-ups in implementing the Government’s programme in the MOD.

Russell Brown (Labour, Dumfries and Galloway)

Just to back up my hon. Friend’s point, those of us on the Committee today who have a genuine interest in defence have witnessed that over the past couple of years. The way to reduce costs is, deeply regrettably, people. We have seen that not just with civil servants, but with front-line serving military personnel. That is a big price. Perhaps two or three years down the line, people will question whether it was a price worth paying.

Kevan Jones (Labour, North Durham)

I understand what my hon. Friend is saying. Another point is that there is a common misconception in defence of “military personnel, good; civil servants, bad”. That is a simplistic argument that I think we, in all parties, have fallen into for far too long.

The argument does not recognise the fact that when we talk about the civil service, or when the press talks about the pen pushers, we mean people with highly technical skills, without whom we would not be able to deliver the capability that our armed forces need in their operations. It is important to acknowledge not only their career path, but the knowledge that a lot of them have built up over many years, which is invaluable.

It is argued that driving down the number of civil servants is a good thing. Obviously, it is a bad thing, but the Government are doing it anyway, and driving down the number of armed forces personnel. I know from my time at the Ministry of Defence that the cost of employing military personnel is far more than that of employing civil servants. If we lose the knowledge that is in the DE&S, we could have a situation in which it will have to be back-filled by military personnel, which will be more expensive, and that will obviously lead to costs as well.

My hon. Friend the Member for Plymouth, Moor View touched on the issue of pensions and exactly what the situation will be. There are two issues. One relates to civil servants in the Government scheme. Will the pension liabilities transfer—I guess not—and who will pick up the tab for the continuing liability of the people who have accrued pensions over a long period?

I am sure that any new pension scheme that could be offered by the GoCo employer would be on less generous terms than that currently enjoyed by civil servants. Have the Government given any thought to how that will be managed to ensure that there will not be a huge leakage of people? They might think it is time to leave if they are in a situation whereby their new pensions are going to be on a very inferior basis.

The idea that TUPE regulations make it impossible for a new employer to change terms and conditions or get rid of people is a misconception. That is not the case. The Minister challenged me and asked whether I was suggesting that that is how the GoCo will save money. No, I am not, but it will. The only way it will save money is by introducing inferior terms and conditions or reducing the headcount of people in the organisation.

I come back to my favourite subject of Bernard Gray. In his evidence to us, he claimed that the main driver for why we need a GoCo is that we can actually pay people more. I am sure he does not mean that everybody in the new GoCo will be paid more; I think he is possibly talking about attracting a certain number of individuals who will be on a higher scale of remuneration, and on a package such as he enjoys, which is in the public domain. I am not sure whether the Government have legally signed it off yet, but his salary is far higher than the Prime Minister’s.

That salary runs counter to what we have heard from the coalition Government over the past few years, which is that we should be driving down the pay of civil servants and those working for public bodies on the basis that they should not earn more than the Prime Minister. Yet the Government are setting up a mechanism to pay a salary higher than the Prime Minister’s, which shows how naive and stupid the original policy was in terms of trying to attract individuals.

It is not clear what Mr Bernard Gray is trying to get at. He gave evidence to the Defence Committee on 4 September this year. The Chair said to him:

“What you are essentially trying to do is to persuade the Treasury to loosen some of the restrictions on the civil service terms of employment for DE&S-plus. Is it possible for them to do that for DE&S without also doing it for all the other Government Departments?”

We can achieve that without going down the GoCo route, as with existing examples such as the Debt Management Office. When the Chair asked him what the answer was, he said, “We don’t know yet.” He did not know on 4 September this year, but we are now considering a piece of enabling legislation, which will give freedom to the Government to enact the GoCo—to go through the competition that they say they are going through at the moment. Everything comes back to a flaw that goes through the entire piece of legislation, which is the detail.

We are being asked to scrutinise the Bill, as the other place will be, but with much of the detail to be put in place afterwards. We may return to discuss that situation under one of the later clauses, but it is vital that the matter comes back to Parliament before the GoCo takes place. The employees are faced with uncertainty, because of the potential difficulties it could create, even with the TUPE regulations put in here; in future, the present Conservative Government could abolish TUPE negotiations altogether, and then where would that leave the employees?

Finally, to reiterate what my hon. Friend asked about where the TUPE regulations will apply, they will clearly apply if the civil servants and other people move from DE&S to the GoCo, but if, for example, as was described at length the other day, the Government use their golden share to bring the GoCo organisation back in house, will those people be transferred on their new terms and conditions, or will they return to civil servant terms and conditions?

Going back to Mr Bernard Gray’s evidence to the Select Committee, those people would then be out of synch with any civil service scheme. We need to understand where TUPE applies, therefore, and the Government need to be clear about what the terms and conditions of people would be if we brought them in house. Will they revert to the old civil service, or remain on their existing contracts?

Russell Brown (Labour, Dumfries and Galloway)

I want to add one or two things to the points made by my hon. Friend. As a trade unionist, many of us thought that the Transfer of Undertakings (Protection of Employment) Regulations were going to be a saving grace when they arrived on the scene; TUPE was going to be the white knight on a charger coming over the hill to save everyone. My hon. Friend, however, has made it abundantly clear that TUPE is not an absolute saving grace; it is nothing more than a temporary measure. All those people who are involved and caught up in the whole situation as we move forward—the civil servants and all the staff producing products for our military—deserve as much security and certainty as anyone else. The tragedy is that the Bill gives them nothing.

On 5 September, the trade unions were asked—by me—what the feeling on the ground was. The response came back:

“There is massive concern on the ground. People are very unsure; they still do not understand how the transfer will take place. There has been an announcement this morning about potential changes to the TUPE rules.”––[Official Report, Defence Reform Public Bill Committee, 5 September 2013; c. 75, Q157.]

TUPE is only as good as how it is written up and constructed today. If we seek massive changes to the TUPE rules in future, what will that mean for any work force anywhere in the country?

Over the past six or seven years, I have witnessed on a number of occasions businesses changing hands, contracts changing and TUPE regulations coming in to what was deemed to be help for the work force. I am struggling to discover whether there was a single occasion when people were given anything more than a little bit of protection. There was no real benefit for people.

Both my hon. Friends referred to pensions. I remember one large public sector organisation that decided to hand everything over—it took everything out-house, I should say—and went to a contractor. The pensions for a work force of more than 150 went missing for three years. That was a really traumatic time, although thankfully we managed to get the situation resolved at the end of the day. It is not just about hourly rates and terms and conditions that people have to adjust to on a day-to-day and week-to-week basis, but about what lies behind that, and perhaps years of pension contributions.

Only last Friday I met a chap who works for the local council and came to see me about a worrying situation, which relates to this point about people being on all sorts of different terms and conditions when a change is made. There was one section in my local authority that brought in a contractor to do part of the work. This involved completely different terms and conditions and a significantly higher annual salary. Some two years later, the council has decided that the contractor can go, but that the work force belonging to the contractor will now transfer to the council. The people who worked for the contractor will retain their terms and conditions. The ridiculous thing is that some of the council staff initially transferred to the contractor, so there are guys who have probably worked together for around 20 years who had the opportunity to go to the contractor on new terms and conditions, but are now coming back on those protected terms and conditions for a period. That does nothing more than cause animosity within a work force, which was why I had someone knocking at my door.

Oliver Colvile (Conservative, Plymouth, Sutton and Devonport)

May I say how pleasant it is to serve under your chairmanship, Mr Amess?

The hon. Gentleman makes an interesting case, but I am curious because this situation has been arising not for the past five or 10 years, but for somewhere in the region of 20 years. I remember being slightly involved with some of this stuff when we were talking the reorganisation of local government. Why is the hon. Gentleman making his point only now, rather than trying to deal with the situation when Labour was in power? I am curious to know some of the thinking behind this.

Russell Brown (Labour, Dumfries and Galloway)

I thank the hon. Gentleman for his intervention, but the TUPE regulations came in only in 2006. I do not doubt for one minute that there was lots of activity going on out there for the last 20 or 30 years, but this is seen as some kind of protection, and I have to tell the hon. Gentleman and his colleagues that at least it is something—something is better than nothing. The reality is that there is a strong history of the process being abused at a later stage.

Kevan Jones (Labour, North Durham)

We also need to remember that the Conservative party, including their MEPs, fought elections opposing the TUPE regulations.

Russell Brown (Labour, Dumfries and Galloway)

My hon. Friend is absolutely right. He has a long pedigree—

Kevan Jones (Labour, North Durham)

And a long memory.

Russell Brown (Labour, Dumfries and Galloway)

Undoubtedly a long memory as well.

Mark Pawsey (Rugby) (Con) rose—

Sir David Amess (Conservative, Southend West)

I call James Pawsey.

Mark Pawsey (Conservative, Rugby)

Mark.

Sir David Amess (Conservative, Southend West)

I apologise; that was the hon. Gentleman’s father.

Mark Pawsey (Conservative, Rugby)

Is the hon. Gentleman seriously suggesting that we should not make any changes to defence procurement because of his concerns about TUPE and that instead we should have a whole new set of TUPE regulations that are appropriate to the Bill?

Russell Brown (Labour, Dumfries and Galloway)

I am sure that you will not make that mistake again, Mr Amess, if you are sitting in the big Chair downstairs at some point in the future.

I say to the hon. Gentleman that I am living in the real world, because I do not expect a new regime to be put in place to protect the work force that will be dealing with vital work for the security of our nation. In our evidence session back on 5 September, it was abundantly clear that the two trade union representatives had serious concerns for the people they represent. We need a quality work force delivering for us, and they need a degree of certainty.

I fear for the loss of experience and talent. In my constituency, I have seen talented people walk away from businesses that have been taken over by other companies when TUPE protection was supposed to be in place. TUPE is not the answer to all the woes that we will witness.

Philip Dunne (Conservative, Ludlow)

I made my contribution to our debate on the clause at the outset, so I shall address some of the points that have been raised by the hon. Member for Plymouth, Moor View and her colleagues.

The hon. Lady asked about the skill base within DE&S. She is quite right to raise that because it is fundamental to the success of DE&S that we are able to recruit and retain suitably qualified people with the right skills. The fact is that there are vacancies in DE&S and we have an ongoing recruitment campaign. That campaign was kicked off this summer, and I am pleased to say it is having success in recruiting more skilled people to the organisation.

When I was giving oral evidence to the Committee, I said that the proposals were not about cutting jobs, as was suggested a few moments ago by the hon. Member for North Durham, but about ensuring that we are in a position to recruit and retain the right people. Does that mean that there will be different rates of pay for those new joiners coming in under a GoCo and those who have been TUPE-ed across from the existing organisation? At the beginning, that might be the case for some people, but it is not the intent. There is no intention to create a two-tier system of employees based on whether they have just been hired or have been in place for some time.

Kevan Jones (Labour, North Durham)

I am reassured by what the Minister says and I am sure that the work force will be, too. Will he give a commitment today that if DE&S goes over to a GoCo, the number of jobs in the GoCo will be protected?

Philip Dunne (Conservative, Ludlow)

No. As the hon. Gentleman well knows, I am not in a position to protect job numbers in an organisation when we are seeking to outsource the management of that organisation to somebody else. That would not make any sense at all. What we are seeking to ensure is that all employees in the new GoCo environment have the opportunity to benefit from whatever improvements to their existing terms and conditions are put in place by a new manager.

Kevan Jones (Labour, North Durham)

In light of what the Minister has just said, will he give an assurance to the employees of DE&S that whoever takes over the new GoCo will not get efficiency up by reducing the work force, or can he not say that?

Philip Dunne (Conservative, Ludlow)

As I pointed out to the Committee two days ago when we were discussing where savings and efficiencies will come from, the big target is to make efficiencies in the procurement programme itself, which accounts for 82% of the spend managed by DE&S. There may be savings and efficiencies to come out of the operation and organisation of DE&S itself—I am sure that there will be—but we would anticipate that the bulk of the savings will come out of better procurement.

Alison Seabeck (Labour, Plymouth, Moor View)

I appreciate that the Minister is trying to answer the questions we posed. Something has occurred to me about how staff will be selected to be transferred across to the GoCo. At what stage in the process will the MOD have discussions with the GoCo on which individuals sitting within DE&S have the skill sets that the MOD wants to keep, but that the GoCo might equally want? How will those discussions be resolved?

Philip Dunne (Conservative, Ludlow)

That is an interesting question. The hon. Lady rightly points to the fact that we intend, as was clear from the letter I recently wrote to the Committee, to retain some skills within the MOD to enable it and the commands to retain the intelligent customer role. There will be some time between the decision point at which we decide whether to go down a GoCo route—and with which winning consortium—and such time as the contract takes effect. We anticipate that that will be a period from next summer until the turn of the year. Therefore, over several months in the second half of next year, discussions will take place between a successful contractor and the MOD about which individuals go in which direction. I gave an indication of our current assessment of the order of magnitude of those transfers in the letter I wrote and that is as far as I can go at the moment.

Alison Seabeck (Labour, Plymouth, Moor View)

I will continue on this line. We received the Minister’s letter with the specifics on the numbers but, for the benefit of the Committee, will he state at what point in the period between the GoCo being accepted and starting and the staff being transferred will consultation happen with the work force and their representatives?

Philip Dunne (Conservative, Ludlow)

There is continuous consultation with the work force about the whole process that we are going through now. There are regular sessions between management and interested employees, and I addressed a town hall session of employees when we announced the White Paper in May. I assure the hon. Lady that there will be regular discussions. As to the formal consultation process, I cannot stand here now and say when that will start, but I commit to there being one.

We expect that there will be some discussion with the consortia as to their views on the types of roles, rather than individuals, that they would anticipate that they will need, or like to see left at the MOD, so that might form part of the negotiations in the first half of next year. Implementation will then take place in the second half of next year.

Alison Seabeck (Labour, Plymouth, Moor View)

I thank the Minister for his patience. Is there any risk that, given the relationship that exists between some of the bidders in the GoCo consortia and DE&S staff, bids could go in for individuals—because they had been appointed with them, or they understand their skill sets—rather than just the post?

Philip Dunne (Conservative, Ludlow)

Given the scale of what we are talking about, it is most unlikely that there will be discussions about individuals until the structure of the separation is clear. At the most senior levels—the board level—within DE&S, there will be exposure involving individuals within DE&S and the bidders, so views may be formed about a small number of individuals, but I would expect that that would be a handful. This is essentially a transaction involving several thousand people and we will not be providing access to those individuals for the bidders until such time as the contract has been signed.

The hon. Lady asked whether terms and conditions would remain in place on a transfer back to the MOD or to a third party. Clearly, if terms and conditions that were transferred across in the first instance were subsequently changed by a GoCo operating company and there was a subsequent transfer, those enhanced terms and conditions would be inherited either by the MOD or another party. At present we have no intention of bringing that business back into the MOD. The much more likely eventuality in the event of a transfer is that another consortium would come in and inherit the terms and conditions prevailing at the time.

The hon. Lady and the hon. Member for North Durham both mentioned pension arrangements. Staff who transfer will remain members of the current pension scheme, and they will of course have the opportunity in future, should a new scheme be established by the GoCo operator or should access be made available to an existing scheme, to choose whether they wish to move into that new scheme. For the time being, however, they would remain within their existing arrangements.

Kevan Jones (Labour, North Durham)

That is very interesting. Who will pick up the employer’s liability for those individuals? They will no longer be civil servants. The Minister says they will keep the scheme when they transfer to the GoCo. Will the GoCo reimburse the MOD for those contributions?

Philip Dunne (Conservative, Ludlow)

From his work prior to joining this place, I am not sure how familiar the hon. Gentleman is with transfers of businesses, but there is a perfectly well established route under which both pension liabilities and contributions are transferred when an employee moves between one organisation and another. That typically involves the existing pension scheme continuing to receive contributions for those individuals who have chosen to stay with the scheme, and they continue to have the benefits of that scheme. In the event that the individual chooses to move to a new scheme—and it is the choice of that person, rather than the corporation—the contributions would be paid into the new scheme and a portion of the liabilities in the old scheme, as assessed by actuaries, would also be transferred. That is what happens in real life.

Kevan Jones (Labour, North Durham)

Yes, I am quite well aware of what happens in real life. Ten out of 10 for the Minister.

I will be kind to the Minister because it is Thursday afternoon. If he does not know the answer, he may write to me if he wants.

Philip Dunne (Conservative, Ludlow)

I have given the answer.

Kevan Jones (Labour, North Durham)

No, that was not an answer. For those who transfer to the GoCo but remain in the civil service scheme, will the employer’s contributions be paid into the scheme by the GoCo? The contributions will certainly be a lot more generous than those offered to new employees in a new scheme.

Philip Dunne (Conservative, Ludlow)

I have just explained it to the hon. Gentleman.

Kevan Jones (Labour, North Durham)

No, you haven’t.

Philip Dunne (Conservative, Ludlow)

I specifically said that contributions relating to individuals who are staying in the existing scheme will be paid into that scheme. I did not say that both the employer’s contributions and the employee’s contributions will be paid into the scheme, but that is how it works—contributions in total.

Kevan Jones (Labour, North Durham)

I am sorry, but the Minister has not answered the question. The contributions for the new provider will be quite big if it has to meet the more generous contributions to the civil service scheme. It is important, therefore, to know whether those contributions will be picked up by the GoCo, which I assume is what the Minister is saying. Or will the taxpayer still pick up those contributions? Clarity is needed.

Philip Dunne (Conservative, Ludlow)

The hon. Gentleman is assuming that a GoCo operator will set up a new scheme with more generous terms. We simply do not know that. Even if the terms are less generous than those applicable to members of the civil service pension scheme, the individuals will most likely choose to remain with the civil service scheme. In that case, the contributions, both employer and employee, will continue to be made into the civil service scheme by the GoCo employer and the individual who becomes an employee of the GoCo.

Kevan Jones (Labour, North Durham)

That is fine. We have finally got there. The new GoCo employer will pay the employer’s contributions to the civil service scheme. I accept that there will be an option for people to go into the new scheme, and they will clearly set up a new scheme because new employees of the GoCo post-transfer will not have the right to join the civil service scheme. Therefore, there will be two separate schemes running. It is not a matter of whether the GoCo will choose to set up a pension scheme; it will set one up.

Philip Dunne (Conservative, Ludlow)

The hon. Gentleman is right that new employees will need pension arrangements. Whether the GoCo sets up a new scheme or whether the existing scheme of one of the members of the GoCo consortium is made available will be a matter for it to decide.

Mr Jones rose—

Philip Dunne (Conservative, Ludlow)

I am going to move on. We have done this one to death. I am sorry, but I am not willing to take another intervention on the same subject. We have covered it about six times.

The hon. Member for Plymouth, Moor View asked about military secondments. Those on the MOD payroll and the military register who are seconded to the GoCo in the future will remain MOD employees, and their remuneration will be reimbursed by the GoCo if that is what is determined in the contract. They will continue to benefit from the terms and conditions of their military service. The hon. Lady asked whether the code of practice will continue to apply to the GoCo. I would like to come back to her on that matter in writing, but I imagine it will. I think I have addressed all the issues she raised.

The hon. Member for Dumfries and Galloway described these arrangements as temporary measures. I am not sure which aspects of the proposed transfer of DE&S into a GoCo he regards as temporary, but I assure him that there is no intention for it to be a temporary measure.

Russell Brown (Labour, Dumfries and Galloway)

The point I was making—I apologise to the Committee if I did not put it across correctly—is that no one should see this as a solution to all problems. It may, as has happened in most cases, turn out to be a temporary solution before something much more drastic befalls the work forces.

Philip Dunne (Conservative, Ludlow)

I can seek to reassure the hon. Gentleman if he is sceptical about whether this will be a lasting transformation. It is certainly our intention to find a new and improved arrangement for procurement and defence that will endure beyond the life of this Government and the next Government. We think this is the right way to go for defence procurement for succeeding generations.

Alison Seabeck (Labour, Plymouth, Moor View)

My hon. Friend the Member for North Durham, who has a wealth of experience as a Minister, persistently flagged up the issue of the transfer of pensions and his concerns about the leakage of personnel that may result from these changes. He also flagged up the potential for a three-tier work force, and the continuing uncertainty about the ability to move work into the GoCo, out of the GoCo and potentially back again. The Minister reassured us and said he does not think that is likely to happen—it is more likely to be a move from contractor to contractor. However, even in those circumstances there is upheaval and the risk of ever-changing terms and conditions.

My hon. Friend the Member for Dumfries and Galloway spoke with a degree of expertise about TUPE transfers and the mismatch that results when outsourcing happens and people work together in the same workplace, doing the same jobs but on different pay and conditions. TUPE was introduced only in 2006, and it has bedded down, but there are clear signs that in some places it is being abused and is not offering full protection for work forces.

Government Members have been enthusiastically hopping up and down and saying the Opposition have got it all wrong, but they are incorrect in their assumption that we intend to oppose the clause. We do not intend to oppose the clause, because TUPE, on the whole, is the best game in town and therefore we are not willing to go back to the drawing board on the clause.

I thank the Minister for his offer to write to me on one or two issues that have been raised, and I look forward to receiving his answers. We will not oppose the clause and I believe that the new clause will be discussed later.

Clause 10 - Transfer schemes

Alison Seabeck (Labour, Plymouth, Moor View)

This clause, which you may not have had the benefit of reading, Mr Amess, deals very seriously with the decapitation process and enables the Secretary of State to design a scheme to allow for a hopefully smooth transition between one contractor and another. Of course, clause 10 is linked to schedule 3 and allows—although I will be brief on this—a degree of revisiting of some of the arguments we made during earlier debates.

The clause gives the Secretary of State the power to make a scheme to transfer properties, rights and liabilities in two circumstances. The first is where the contractor is in breach of a “services contract”, defined in subsection (6) as

“a contract…to provide defence procurement services…by virtue of arrangements mentioned in section 1”,

where the breach occurs in circumstances of, or is of, a specified kind. The second is where the contract has come to an end; in other words, the nine years is up and the term has expired.

However, we did not really tease out whether the Minister or the Chief of Defence Matériel realistically expect to run two contractors or more in tandem, which, of course, is also possible where there has been a failure or breach of a services contract in a given or specified way. Does the Minister have a view on exactly what the time scale for this type of transfer might be? For how long could there be a potential overlap between one contractor and the other—never mind the issue of two contractors potentially running in tandem, perhaps running two different pillars of the services separately? It would be helpful to know whether he has a view on this, or whether it is a question of “how long is a piece of string?”

Will firms that have contracts currently being managed by the contractor that is about to have its rights and powers transferred have any say in the matter? Let’s face it: this is yet another pair of hands through which their IT might be moved, just to express one concern they might reasonably have. Will there be any consultation with industry about the relative success and failures of the contractor that is about to be divested of its interests? I am talking here about when a contract is coming to the end of the time scale, not when there has been a particular breach of contract. Will the contractor’s views be sought?

Subsection (4) allows for certain property, rights and liabilities to be left with the contractor. Who will oversee this process and reach a view that this power does not allow the Secretary of State simply to give away Ministry of Defence assets? Who will assess the value of those assets, and at what stage in the process will that assessment be made?

Paragraph 3 of schedule 3 refers to compensation being offered

“to any person whose interests are adversely affected”

by the scheme. Just how broad is that commitment, and will it extend to individual employees? Again, an example of where and how this power might be used would be useful.

The powers in schedule 3 also allow for contracts of employment to be transferred. Can the Minister please explain the circumstances in which that might happen, so that we can understand whether there are any unexpected implications for personnel or whether it is all very straightforward? This refers back, of course, to the TUPE issue.

Paragraph 4 of the schedule reminds us of the potential for

“foreign property or a foreign right”

to be a concern in that regard. If the Minister could paint a picture of the scenario specific to foreign property and rights being transferred, I would appreciate that too.

Philip Dunne (Conservative, Ludlow)

Clause 10 and its related schedule 3 provide a number of necessary safeguards, including the power for the Secretary of State to create a transfer scheme that will enable the transfer of the business to another contractor or, in extremis, back to Ministry of Defence. When a contract expires or is terminated for whatever reason it may be necessary for the Ministry of Defence to manage operations of procurement or to transfer the undertaking to a new company.

The hon. Member for Plymouth, Moor View asked some specific questions about how such a transfer might take place, including the length of overlap between one contractor and its successor. It is hard to envisage the timetable that might apply. In part, there will be provisions on termination in the contract that is eventually negotiated between the GoCo contractor and the MOD, which might include some timings of termination arrangements. The best guidance I can give is that if the decision is taken early this summer to proceed with a GoCo, we anticipate that the GoCo contract will become effective around the turn of the year. That suggests that a period of around six months will be required from agreeing a contract to it being implemented. That might be a suitable guide as to the interval required between a decision to make a transfer and the transfer being implemented, but it will depend on the circumstances of the transfer. If it is orderly and on a re-let of a contract, there will be a clear timetable. However, if the powers are being taken over by the Ministry of Defence because of a breach or a failure—the hon. Lady was right to say that those circumstances would be different—the Ministry will have to be in a position to stand in the shoes of the contractor more or less instantly once that decision has been taken.

The hon. Lady asked whether we envisage having two GoCo contractors running in parallel. I hope that when she has the opportunity to read the letter that I provided to the Committee earlier today, she will see that we are considering a phased transfer by domain, with the initial domain—maritime—transferring two years before the competition for the remaining domains becomes effective. It is likely that the successful contractor for the initial domain will also be in the competition for the other domains and in a strong position to win them, but it is important that we maintain competitive tension to ensure that the contractor puts in a competitive and compelling bid for the other domains. Therefore, we do not intend to give exclusivity rights over those domains to the successful contractor for the initial domain, which opens up the prospect of having different contractors in the future. We will have to wait for the outcome of the competition before we know whether that will apply or not.

Alison Seabeck (Labour, Plymouth, Moor View)

I have a very small point to make. I assume that there is nothing to stop the contractor operating the first domain bidding for any subsequent domains.

Philip Dunne (Conservative, Ludlow)

As I say, such a contractor would be in a strong position to bid for the other domains because it was most closely embedded in the relationship with the MOD. It certainly would not be precluded from bidding. In fact, it would be encouraged to bid, but we also wish to encourage others to keep them honest.

The hon. Lady also asked whether there would be any consultation with industry or the contractors about a transfer in the event of the MOD contemplating that before it took place. In the event of poor performance by a GoCo contractor, there would be an almost continuous dialogue between the MOD, the commands and the contractor to encourage an improvement in performance. There would be significant consultation with the contractor. On whether we would consult with the industrial base that was supplying services, it would be expected that, if suppliers were expressing frustrations about the conduct of the contractor, they would bring those to our attention. I expect that we would have discussions, but it is unlikely that we would be involved in some formal consultation, because if suppliers were unhappy about the strength of the contractor in negotiations with them, they might have an incentive to be disobliging about it, so as to remove it in favour of somebody who might be softer.

Alison Seabeck (Labour, Plymouth, Moor View)

I therefore assume that it is the role of the governor to listen and talk to suppliers in different forums, being sensitive and picking up on particular issues.

Philip Dunne (Conservative, Ludlow)

Yes. The hon. Lady correctly anticipates that the role of the governor will be to manage the relationship with a GoCo contractor and ensure that issues arising through the commands out of the MOD—concerns about its performance—are brought to the attention of the contractor so that it can remedy them.

The hon. Lady also mentioned clause 10(4) and raised the spectre of the Secretary of State having the power to give away assets in the event of a transfer, suggesting that in some way the taxpayer might suffer. There is no intent for the Secretary of State to give away assets. Remember that a GoCo contractor will be the agent of the MOD. The MOD will retain ownership of the assets. Assets that might be given away that I can conceive of are likely to be intangible assets, such as software programmes or analysis that the contractor has developed on a proprietary basis, which it might be able to retain. We will not find ourselves in the position where a substantial asset base is given away. This is not sale of gold bullion at a knock-down price. [Interruption.] I am seeking inspiration, getting to the stage of the evening where glasses are needed.

I have had some advice saying that, as drafted, the contract will be for all four domains and that, in respect of competition for the four domains, including the joint domain, after the initial phase is over the subsequent phases will transfer automatically, in the event that the performance of the contractor has been up to speed. Whether that survives negotiation remains to be seen. Maintaining an element of competition before agreeing the transfer of subsequent domains is quite important. We will be negotiating that as we proceed down the track.

I sense that there is no great problem with the principle of having the Secretary of State retaining the power to transfer the business either to another contractor or back into the MOD, and the hon. Lady is indicating that that is the case. That leaves me to say that it is important for the Secretary of State to retain the power to decide exactly what is to be transferred at the point that the transfer scheme is created. The power may be exercised in unforeseen circumstances, so maximum flexibility for the Secretary of State is required under the clause.

The contractor will be conducting work that is critical to national security and it will not be appropriate to rely on contract provisions alone. For example, where the entity becomes potentially insolvent and elements of the business are liable to fall into the control of an administrator, a statutory provision will offer more certainty and control, and therefore less risk. Contractual provisions are more easily amended or subject to dispute.

In addition, third-party rights can usually be transferred only with the consent of the third party or as a transfer scheme, such as under clause 10, that can direct that such rights are transferred. The intention is therefore to use such a scheme only in a limited number of scenarios, such as early termination of a contract. The critical national importance of defence procurement makes it inappropriate to rely on contractual provisions alone. Moving assets via a transfer scheme will avoid the need for third-party consent and ensure the continued delivery of defence procurement services.

Clause 11 - Financial provisions

Alison Seabeck (Labour, Plymouth, Moor View)

I shall be brief. We have already debated at some length the risk and the moneys being paid out to cover various liabilities. The clause sets out the ability of the Secretary of State to make payments from money provided by Parliament for certain expenditure that may be incurred when the Secretary of State takes on the contractor’s liabilities. Does the Minister expect that that will be paid at the end of the contract, if it runs for the contracted period, or is it simply for use when the contractor fails and the MOD has to undertake a transfer, as set out in clause 10?

Philip Dunne (Conservative, Ludlow)

If I may, I shall set a little context before responding to the hon. Lady’s specific question. Given the scale of the change we are proposing—we want to transfer a function of Government to a private company—it is appropriate that the Secretary of State seek parliamentary approval through the Bill. The proposed arrangement is distinctly different from other transfers to the private sector. It is not a full outsourcing of a purely transactional or commercial activity, as the Government will retain a special share to be able to exercise a step-in function. The Government will therefore have a continued interest in the operating company, rather than it being fully moved into the private sector. That also has implications for the classification of the GoCo by the Office for National Statistics. Value for money to the taxpayer is of the utmost importance and one of the key drivers of the change in how we procure equipment for our armed forces.

I assure the Committee that no public money will be used to establish the new management company. All costs in establishing the management company will be met by the successful bidder for the contract. Once the contract has been awarded, the Secretary of State will be required to authorise payments from the Department’s budget for the enduring costs associated with the new arrangements. That cost is no different from that incurred by the Ministry of Defence today, although how it is reported to Parliament will change. In addition, as it is a possibility that the new arrangements will be vested part way through a financial year, it is felt appropriate to ensure that there is clear statutory authority to make such payments, hence the clause.

The Secretary of State needs the ability potentially to provide working capital out of voted funds, but it is anticipated that that will be required only in limited circumstances. An example of when that power might be exercised is at key dates when substantial numbers of staff transfer to the new company, which might create a temporary cash-flow issue for the company. It might represent better value for money for the Government if they provide temporary working capital cover, rather than getting the company to fund that commercially. If the power is not given, additional costs might be incurred unnecessarily as a financial liability will be placed on the contractor, resulting in interest being applied that will ultimately be invoiced back to the Ministry of Defence under the terms of the contract.

The clause will give the Secretary of State the authority, where appropriate, to take on liabilities incurred by the contractor to ensure the continued integrity of the operating company as an enduring entity if the management contract is terminated, when it is re-competed or, indeed, when it starts up. For example, that may relate to contingent liabilities, non-insurable risks or when the cost of insurance does not represent value for money to the Government. The step-in right means that the Ministry of Defence accounts will recognise liabilities that extend beyond a single year.

Those are all strong reasons why I believe it appropriate to put these provisions to a statutory basis. Financial risk will be appropriately distributed, and the accountabilities, limits of responsibility and associated governance of the contractor will be defined in the contract.

Some risks must remain with Government, but those risks, when it is value for money to transfer to the contractor, will be transferred through the contract. The contractor will act as agent for the Ministry of Defence and manage the delivery of defence equipment procurement, support and logistics. That will involve the provision of accurate information to the Ministry of Defence to enable it to construct a robust and affordable equipment plan and a focus on delivery of outputs once agreed.

The contractor will be responsible for providing financial management information to the Ministry of Defence in compliance with “Managing public money” and international financial reporting standards as adopted by the Treasury. As such, the contractor will be responsible for ensuring advance notification to the Ministry of Defence of any new contingent liabilities, provisions or losses arising from the contracts it is managing.

The capability programmers of the Ministry of Defence will remain responsible, as they are now, for deciding the equipment setting—what should be bought and when—and the contractor will be free to make appropriate management decisions about how best to deliver those outputs. The accountabilities, limits of responsibility and associated governance of the contractor will be defined in the contract.

The Government will retain the right to make changes or provide direction on specific projects, although that will be subject to a formal change control process to ensure that boundaries and accountability are clear.

The GoCo companies will be UK registered and domiciled, as we discussed on Tuesday, and pay UK tax. It is expected that British and non-British companies will be involved in the ownership, but that the contractor itself will be British. However, it is anticipated that its shareholders will include international firms, similar to the GoCo that manages the Atomic Weapons Establishment.

For those reasons, the direct answer to the questions asked by the hon. Member for Plymouth, Moor View is that the flexibility will be there to provide finance at any stage during the process, as and when required to cope with eventualities that we cannot foresee here today.