Oral answer (Lords) on Military Equipment: Sales - Jan 30

To ask Her Majesty’s Government, following the liquidation of Used Equipment Surplus and Storage Ltd, what assessment they have made of security concerns over the proposed sale of military equipment held by that company on behalf of Leonardo S.p.A.

My Lords, the Ministry of Defence takes the safety and security of the disposal and storage of military equipment extremely seriously. Officials have visited the site on a number of occasions. I understand that Leonardo has today had further discussions with the liquidator, and is confident that the identified equipment is not sensitive. The two parties are now working closely together to bring this matter to a sensible conclusion.

I thank the Minister for that Answer. I remain concerned about this. Having been deeply involved in the intelligence world for many years, I know the value of getting hold of equipment such as defensive aids, because you can reverse-engineer it, and look at it to see how that country is developing techniques, even if it is an old bit of kit. I am aware that a police investigation in December 2017 highlighted the fact that the police felt that some items were sensitive. Was this a List X firm and a List X-bonded warehouse? Are we now going to go through in detail the equipment listed by the liquidator to see if there is anything we should not have allowed to go onto the open market? It sounds very dangerous indeed.

The storage company, UES&S, was contracted by Leonardo to provide secure storage and disposal of military equipment that Leonardo no longer required. There was no contract between that disposal company and the MoD. I reassure your Lordships that the MoD has investigated Leonardo’s disposal practices, and concluded that the company is following all relevant processes and disposing of equipment in accordance with government policy and its List X obligations. As the noble Lord will be aware, these obligations are onerous, and apply to all items of equipment listed as secret and above.

My Lords, what monitoring does the Ministry of Defence carry out in relation to arrangements such as those between Leonardo and the storage company? In particular, given that the national interest may be at stake, what legal advice have the Government taken on whether or not it would be appropriate to seek an injunction against the auction proposed for 6 February?

As we now know, there is reassuring evidence that the items are not sensitive, but the noble Lord asks an important question. The MoD has the power to stop the sale of items, if that sale would be contrary to national security. I reassure your Lordships that the MoD has made it clear to the liquidator of the storage company that the sale of potentially sensitive items, if that is what they were, would have been a breach of national security. Where criminal activity is believed to have taken place, such as a breach of the Official Secrets Act, we would engage further with the MoD Police for them to access the site and reclaim any sensitive items with a view to potentially stopping any auction.

My Lords, does the Minister agree that if any person allowed a foreign power to use defence equipment in the way the noble Lord, Lord West, suggested, they would still fall foul of the Official Secrets Act?

My noble friend makes an important point. The Official Secrets Act, as your Lordships will be aware, is a far-reaching piece of legislation designed to protect the national security of our country and its citizens. It is very easy to breach the provisions of that Act.

My Lords, according to the Times, officials had to go to this warehouse and physically inspect what was there. Does the MoD not have systems that track the whereabouts of sensitive equipment? If not, why not—or is this another example of the MoD cutting corners under budgetary pressures?

No, and I would not want any credence to be given to such an interpretation of the position. As I said, this is a situation where a respected defence contractor subcontracted a function to another company. That is not unusual in defence procurement contracts. What is important is that the proper protocols and standards are observed. As I indicated to the noble Lord, Lord West, where there is a List X category, companies have to comply with the security policy framework to ensure that they are protected appropriately under the List X clearance requirements. We are satisfied that Leonardo is discharging all its obligations in that respect.

My Lords, what steps did the Government take to find out where the Times got its information? Are they satisfied that that information was totally inaccurate?

We can only speculate that the information was provided either by the liquidated company or by the liquidator. There were visits to the storage facility by Defence Equipment and Support, security officials, MoD Police and the Defence Land Safety Regulator. They all asked UES&S for a list several times but, disappointingly, it was unable to provide one. This may seem strange to the observer, but apparently this facility has been used for more than 20 years. It is full of defence and non-defence related items. UES&S has not catalogued each item. This is apparently why it could not produce a list, but it would have been helpful if, when a list finally emerged, it could have been passed to the MoD.

My Lords, surely one point becomes abundantly clear: the Government, through the MoD, were not monitoring the contract correctly. Surely they should have known that this was happening.

That might seem an easy interpretation to make, but I suggest that it is misconceived. I shall explain why. It is a common commercial structure for the MoD to contract with a defence procurement company. That company will then subcontract other obligations. What is important is that, where we are dealing with List X materials and equipment, the company with which the MoD contracts is under clear and enforceable obligations, which all companies are. I emphasise that Leonardo is discharging these responsibilities. But where we are dealing with below-secret category items, the company is expected to ensure that storage and disposal facilities are appropriate for that equipment. There is no suggestion that Leonardo had not been observing the situation. There seems to have been a genuine breakdown of the relationship, where, I understand, over time items that were going to be disposed of were not disposed of and remained in store. The important feature is that these items, as has been confirmed today, are not sensitive.