from coming in. it is not like it is not happening, but it is just not realistic to think that is going to stop anybody from crossing the border. and the other issues is -- this is the reason why this of in court is hearing this argument. employers say they do not have the tools to check a person's legal status. and it is not their job. especially if you have fake social security cards out there that looks like real ones. that is a challenge that employers are facing and employers are facing. host: 4 we go, i want to apologize to you for -- before we go, i want to apologize to you for name-calling. fon johnson is a national correspondent for the national journal. we will be back tomorrow morning at 7:00 a.m. thanks for watching.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> coming up about half an hour david cameron will conduct a news conference. you can watch the live at 10:30 a.m. eastern.

. . a discussion now on the subject

of value-added tax from this morning's "washington journal." debate, go to our website, c- span.org. and joining us at the table is rachelle bernstein, here to talk about the new study on a value added tax. let's begin with the definition of what a guy you added tax is. we found a definition -- the value added tax is. we found a definition at allbusiness.com -- so it pretty much every product is taxed along the way. how is that passed along to the consumer? guest: it is embedded in the price. the economics are the same, whether you charge a 10% tax on

a $100 sweater. that $10 is taxed by the retailer, whether there is $2 at the retailer it remits in tax, another $8 that the wholesaler remits until it is finally purchased by the consumer. the point is, the consumer has paid in total, $10 in taxes. it is just collected in various stages. host: the deficit commission is looking at the issue of how we can cut our deficit. one thing that could come up is a value added tax. our u.s. debt as a share of the economy is right down near 62%. by 2013, it could be 185% of the share of our economy. the retail federation -- foundation did a study about how this might work -- you chose a

number around 10%. guest: we did not choose the number, first of all. we had commissioned the study. it was performed by an economic advisory firm, tax policy advisers. what our economists did was, to assume that debt that you just talked about, a certain amount of deficit reduction would be needed. perhaps that would be the recommendation to come out of the commission. we assumed that what they are looking for was deficit reduction at the level of 2% of gdp than you would need a 10.3% value-added tax to achieve that level of deficit reduction. that also assumes the base for the tax would be a narrow base, similar to the bases for the

value added tax in europe, similar to state sales taxes, and not tax all the services in the economy. host: other countries have value added taxes. guest: about 130 other countries have it. host: let's take a look at the study and what you found. guest: we found if we impose a value-added tax at the level we are talking about to achieve a reduction of the deficit equal to 2% of gdp, we would have an immediate loss of 850,000 jobs in the economy. retail spending would decline by 5% a year, which is $250 billion, $2.50 trillion over the decade. gdp would decline for three years and would be very

sluggish for several years thereafter. also as a basis of comparison, we looked at what spending reduction would do. if a similar level of spending reduction to reduce the deficit by 2% of gdp was enacted, we would have immediate job growth, 250,000 jobs would be added in the first year. gdp would also begin to climb in the lead in the first year. so there is clearly a difference in putting a consumption tax on the economy and achieving deficit reduction in some other way. host: why not a value added tax? we have to do something about the deficit. people say you can cut spending, but that will not do it alone. you have to raise taxes and somehow. if you go to the bloomberg website, a couple of stories

specifically -- chris ferrell writes -- why not? guest: first of all, a value added tax is not necessarily inefficient tax. our research looked at the various european vats and there were huge compliance issues. about 26% on compliance rates. -- noncompliance rates.

it is not an easy task, despite people saying that. the other thing is not only would we be losing hundreds of thousands of jobs, this is a pact that would lower the standard of living for most americans. the price for purchases for poor, middle-class, senior citizens would go up. this is not a tax that is really good for americans. host: what if you got rid of the other taxes that we are talking about and just had the vat tax? guest: first of all, our study did not address a substitution. one could devise all sorts of ways of coming up with a substitution.

i think what you read for me was not a complete substitution for the tax system but a partial substitution. host: right. guest: i am sure the economic model in would be different depending on how you apply that. currently, 40% of americans do not pay taxes. just providing income tax relief will not progress -- address the regressive the of americans paying taxes. host: our guest is rachelle bernstein. she is from the national retail federation. beth from florida. caller: ok, let's model ourselves after socialist year. people there are not doing

anything because their government is broke. the government does not know how to limit their spending. that is the bottom line. let's just keep going after taxes, break the people's wallet, and then we end up a broken country. have a great day, god bless. host: did you look at other countries? guest: yes, we did. the caller's point is exactly right. since the mid 1970's, european vats as a percentage of gdp, have decreased 37%. basically, they are taxing more in order to spend more in the economy. in the u.s., with our income tax system, we have kept the percentage of gdp fairly stable during that same time period. host: some sarcasm here from a

twitter viewer -- guest: the reason we did the study was to determine what the impact would be on our retell members and on the economy. did we assume a consumption tax would hurt consumer spending? absolutely. we knew that but we had no numbers behind it. believe it or not, nobody had studied what an add-on value added tax would mean to our economy. we thought, with the work being done by the deficit reduction commission, it was important for someone to know what the macro effects would be. host: are you speaking to the deficit commission? have you been asked to? guest: we have submitted our studies, we have not made any

presentations. host: will you? guest: i do not know yet. they are working on this for six weeks before they pull together their final report. as you know, most of them are members of congress, and they are home by now campaigning. host: wayne on the republican line. caller: your example earlier of the $10 tax being added to the $100 sweater is just an example of what we're talking about, with an exception. i do not see anything that out lost sales tax on the state and local level. here in birmingham, it is 8%. so that would be an extra $8.80 added to the $110. that drives me crazy when i think about it. the second thing is, this is the only instance with government

that i have seen where if my income goes down, my spending has to go down. this is the only thing i see where if the spending goes up, well, we just raise taxes in perspective. we do not worry if it is going to hurt somebody or not. -- taxes irrespective. guest: you make a good point bringing in the point with the state and local sales taxes. the europeans do not have the same types of system that we do with state and local governments imposing their own taxes to collect revenues that they need. there would be a lot of pressure on the state and local government if there were a federal consumption tax enacted. states that are relying on these

taxes as their form of revenue, it would be difficult for them to raise these taxes if we had a large federal consumption tax at the same time, and it would put a lot of pressure on them on where to get additional sources of revenue. host: very on the democratic line. new hampshire. -- barry on the democratic line. caller: you cannot just add another tax on this to solve the problem. if you are going to have a substantial body added tax and eliminate the income tax, eliminate state and local, if we go to a flat tax and have the value added tax, maybe that is something. but the system is way too complex. we need a reduction in spending, 1st. get rid of the complexity of the

irs. lay off of the bureaucrats and let them go out and look for a job. host: is there a tax increase that you would support? guest: we are not advocating any specific tax increases at the moment. our study showed the economy would do better if we have spending cuts, not tax increases. our retailers have been hurting for the last couple of years with this economy. the one thing that we think we need to get the economy going again is for jobs to come back. a new tax would basically throw away hundreds of thousands of jobs. we would like to see something done that would be helpful to getting the economy going, and it is not putting in a new tax, based on the research that was done.

host: robert, texas. independent line. caller: i have a comment and a question. does your guest really believe -- hello? does your just really believe the deficit is a problem -- if your just really believes the deficit is a problem, you need to those solutions. guest: we agree with you a rational person would not put this tax on top of the economy at this point in time. six months ago, when this commission was put together, there was an awful lot of talk in washington about the possibility of a value added tax. a lot of people thought it would be a silver bullet. we wanted to know what the economic result of doing that

would be. that was the reason that we looked at the way we did. host: james, pittsburgh. you are on not there. caller: i am a 47-year-old male. many of our taxes are wasted. there is so much waste. all we really have to do is spend our money more efficiently. host: did you want to finish? caller: spend our money more efficiently. it is an awful lot of money. right now -- i am a former construction worker, so you cannot get anything out of me, i do not have a job. but when i did work, i did not

notice my tax money being spent on anything that i agree with, anything that helped me, personally. host: do you have or that helpe. guest: i understand your frustration and hopefully this is something that the commission is looking at, what we need and what we do not need in these hard economic times. host: the governor of indiana was mentioned recently. he was mentioned as a possible gop candidates. let's listen to what he had to say about this issue. >> he wrote, "it would be most useful to encourage savings and

investment. a value-added tax and a flat income tax were the only exception." that might suit our current situation pretty well. it also might fit bill simons '70s of the late nation to have a tax system that looks like someone designed it on purpose. [laughter] host: your reaction? guest: it sounds to me like governor daniels is talking a are redesigning the tax system and perhaps putting in a consumption tax. our study did not look at that because the deficit reduction commission was put together to do just that, to reduce the deficit. we modeled a tax that would raise revenue because we thought that was what their goal was and we wanted to see what that

impact would be on the economy. i have to say, we did not address that exactly. about 10 years ago when there was a lot of talk about looking at tax reform and perhaps replacing a consumption tax within our system, dnr f. -- the nrf did look at that and it would cost a lot of jobs. of the time, the modeling showed about 1 million jobs would be lost, and that was during the time that the economy was doing a lot better than right now. i know the results are old, but when you transition to a totally different tax system, you will have a slowdown for a certain period of time. i do not think we can afford that right now. host: after that speech he

played down the significance of his comments and said that he would only support that under the right circumstances. you talk about consumption tax, and we explained in a value- added tax. i did want to clarify that we're talking about the same thing. guest: yes, i am. some people of talked about a national retail sales tax. even a flat tax as a form of a consumption tax. host: you said you are afraid of the consumption tax system. there are a bunch of taxes that fall under the system of consumption taxes? guest: i'm not sure exactly how i used that. i guess i'm saying that under any type of consumption tax, because we can design consumption taxes differently. they will have served -- similar

affects on the economy, whether it is a national sales tax or a value-added tax. host: we will move on to rich in maryland, republican line. good morning. caller: and think we are in real competition here and other countries are learning lessons from us and doing really well, like china and russia. and they laugh at us because of our taxes. we let something take off and then we burden down with taxes so that it cannot fly and cannot move. it is like getting a drunk a drink. he is not just spend $1 trillion on the economy. he spends at $10 because you give him one. giving money is not a problem. the problem is them cutting down and reducing the complexity of the tax system. and really, even generating money when it comes to

retirement. guest: i could not agree more. i think our income tax system is broken as it is. that is another issue. and hopefully, one that congress will address. since 1986 when we had our last major income tax reform, the system has become extraordinarily complex. and then we have all of these temporary taxes that we put in that will expire and that adds a huge amount of complexity. but that does not mean we should go to ratting on another level of a new type of tax -- adding on another level of a new type of tax. i think that is what the caller was saying. host: this your tweet in about corporate taxes and says, look at the difference between a corporate nominal tax rate and an effective tax rate. u.s. is at the low end come off

very far from the highest. -- is at the low end, very far from the highest. guest: it is true that the united states is far lower than the nominal tax rate. the viewer is absolutely right. we have the second highest, and soon to be the highest corporate tax rate in the world, but because of the various deductions and credits in different -- and different things in our system, the taxes paid by many companies are much lower. when you had on the state income tax burden, our industry is paying 37%, 30% effective rate of tax. host: ok, dan on the independent line. caller: reason for most of this government debt, in my opinion,

is because the last administration started two wars that they did not pay for as they go. and then the corporations incorporate offshore interests on p.o. box and they do not have to pay tax on that. you know, just your thoughts on that. host: why do you take the last part of his statement there. guest: i do not think the corporate tax system is quite that simple. the system still does tax earnings in the united states, but i do understand the frustration with the corporate tax system has its pluses and minuses. i think there are ways of approaching it that would lower the corporate and encourage businesses to come in and do far more in the united states because i think that would help

our economy to grow. right now, we are keeping foreign businesses from doing business here because we have such a high tax rates. host: can you speak to this had nine -- this headline? it is the front page of the "financial times." it speaks about taxes being more of a barrier in getting credit. guest: i will tell you that the retail industry is basically a domestic carrier. we do have stores overseas. there are more operations going overseas, but a lot of what you are talking about there does not apply to our industry. nonetheless, the point that i was just making, and anybody who

is familiar with our tax system and tax policy would understand it and it is correct. when we have a 35% tax at a much lower rate outside of the u.s., there is a barrier. it gets to this concept of corporate tax reform that is really desperately needed. host: cathy, on the independent line. caller: it seems to me ever since president obama set up the debt commission that i hear so many people lining up on one side or the other. we either cut spending or we cut taxes or raise taxes, and they talk like we have a choice. from my perspective, i do not really see a choice. it is like we know that we have to cut government spending, especially in social security

and medicare. we know we have to raise taxes and we know that the economy has to be growing. all three of those things, it is like a three legged stool. they all have to be balanced, but they all have to happen. when i do not -- what i do not hear people saying is, how are we responsibly going to raise taxes? how're we responsibly going to cut the social security and medicare? and at what rate does our economy need to be growing in order to balance out all three? we really do not have a choice of either/or. host: rachelle bernstein? guest: i think the comments are really dead on. i think that is why the president set up a bipartisan deficit-reduction commission with the hope that the people that he selected from both parties will be able to work

together on what could be a compromise resolution that actually could get passed by our progrescongress. and you speak to the fact that there are many things that need to be done to get us to that point, but you also add very importantly that we need an element to come out from economic growth. we want whatever is done to add to economic growth. and i think that our study did show that deficit reduction does help economic growth, but if it is done in the wrong way it can harm economic growth. and that is the point that has come out from our study. host: another headline for you. this one is from the "wall street journal" this morning. can you explain that? it says the u.s. retailers are

caught between for consumers and escalating costs. the prices for commodities and manufacturing, it is costing them more for their goods and they are not able to pass on those increased costs to the customers because customers are not spending money. guest: this is a real problem. this is a problem that japan has been going through in the past decade and the reason they have been having such a difficult time. and economists have looked at this and one of the worst thing that they did was to raise their consumption tax during that time frame. consumers are now saying, even if i have a job, i'm not going to go out and spend because my friend just lost their job and i may not be able to get a new one. if i do buy, i will get the most value out of what i can buy. it makes it very difficult for retailers who were on very thin profit margins. having dared prices increased and being able to sell their

goods. host: what was the national retail federation -- what would you like the president or congress to do to get consumers spending? guest: we think the best thing that can be done to get consumers spending is to get employment back up. when people our national security in the years ahead. but let me say this. the two are not separate. our national security depends on our economic strength and vice versea. as our national security is a priority, so defense and security budgets will continue to -- the deficit reduction.

over four years the defense budget will rise in cash terms and fall by only 8% in real terms. and it will meet the nato 2% of g.d.p. spending throughout next four years. this government has inheritted a 38 billion pound black hole in our defense plan. that is bigger than the entire annual defense budget of 33 billion pounds, sorting this out is not just vital for attacking the deficit but vital for our national security. and that project views, we are the sixth largest economy in the world and even after this review, we expect to continue with the fourth largest military budget in the world. we have a unique network of lineses and relationships with the united states as a member of the e.u. and nato and as a

permanent member of the u.n. security council. we have one of the biggest aid programs in the world, one of the biggest ambassadors and a time zone that allowstous trade with asia in the morning and america in the afternoon. and it requires our full and active engage meant that world affairs. it requires our economy to compete with the strongest and the best and it requires that we stand up for the values we believe in. britain has continually punched its way in the world and we should have no less ambition but we need to have more thought and be more coordinateed in the way we advance our national security and that is what this review set back to achieve. third, i want to be clear, there is no cut whatsoever for our support for the forces in afghanistan. the funding for our operations in afghanistan comes not from the budget of the ministry of defense but instead from the treasury special reserve.

so changes to the ministry of defense that result in today's view will not affect this funding. further more, every time i have been advise that had a particular change might have implications for our source ins afghanistan, i have heeded that advice. in fact,, we have been and will be providing more for our brave force ins afghanistan. more equipment to counter the threat from i.ment d.'s and more protection vehicles like warthog which will be out there by the end of the year and unmanned aircraft systems and crucially, the right level of helicopter capability. fourth, mr. president speaker, i do believe this review has been different than those that have come before it. it has looked at all the elements of national security, moment and abroad, not just defense from its own and

crucially it will be repeated every five years. moving from a ministry of defense that's too big, too overspent to a department that's smaller, smarter and more responsible in its spending. to a higher priority for conflict prevention. from concentrating on conventional threats to a new focus on unconventional threats and from armed force that is are overstretched, underequipped and too much often deployed without enough planning to one equipped with things necessary for the future. first, the ministry of the defendants, even though the m.o.d. will get -- the department will face significant challenges. the m.o.d. will cut its estate,

renegotiate contracts with industry and cut its management overheads including reducing civilians by 25,000 by 2015. we will also justify civil and military allowances. there will be difficult decisions, although these will be made easier by the return of the army from germany. together, all these changes in the ministry of defense will save 4.7 billion pounds over the spending review period. getting to grips with procurement is vital. take the nimrod program it has cost the british tacts pair over 3 be pounds and the number of aircraft has fallen from 21 to nine, the cost per aircraft has increased by 200% and is over two years late. today we are enacting its cancellation. and mr. president speaker, a iraq and afghanistan has v

shown the immense financial and human cost of large scale military intervention. while we must maintain the ability to par take in such conflict but when we fail to resolve conflict, the coveses are always far higher. so we will expand our capable to deploy military and civilian teams to stablize efforts and build capacity in other states and we will double our investment in aid to unfragile and -- countries so by 2015 just under 1/3 of the budget will be spent on conflict prevention. third, we need focus more on our resources not on conventional threats of the past but on the unconventional threats of the future. so we will invest over half a billion pounds of new money in a national security program. this will significantly enhance

our ability to prevent against cyberattacks and on which the whole country now depends. we will continue to prioritize tackling the terrorist threats both from al qaeda and its threats and dissident republicans in northern ireland. although -- need to be made. we are giving priority in our world class intelligence agencies, and we will sharpen our redness tom act on security, organized crime and border security. fourth and crucially, we need to move from armed forces that are overstretched and underquipt to the most modern and flexible forces in the world. now mr. president speaker, we inherited an army with scores of tanks in germany, but that wasn't until recently forced to face the deadly athletes of i.e. -- i.e.d.'s and we have a

royal navy that has been rocked into a cycle of ever smaller numbers with ever more expensive ships. we cannot go on like this. the paper we published today set back a clear vision of the future for our armed forces. the precise budget to 2015 will be reviewed. my own strong view is that this structure will require year-on-year growth in the defense budge et in the years beyond 2015. between now and then, the government is committed to thal vision of 2020 set out in this review and will make decisions accordingly. we are absolutely determined as well that the ministry of defense will commercially become much more hard -- now transition from the mess we inheritted to that coherent future will be a difficult process.

especially in the current economic conditions. but we're determined to take the necessary steps. our ground forces will continue to have a vital operational role, so we will retain a charge army numbering around 5,500 by 20 is a, that is 7,000 less than today. we will continue to be one of the very few countries able to deploy a self-sustaining, properly equipped brigade-sized corps around the world and be able to sustain it, and put 30 now, in the field if necessary. half our personnel should be back from germany by 2015 and the remaineder by 2020. tanks and heavy artillery numbers will be reduced by around 40%. but with the introduction of 12 new heavy chinook helicopters and protected vehicles, this will make the army more mobile,

more flexible and better edwipped to face future threats than ever before. we will also review thank you structure of our forces to make sure we make the most efficient use of their skills and out standing capabilities. this will be chaired by general horton and my member of accountantta his very abled deputy. the royal navy will be edwoipped meet the demands of the 21st century. the hunter killer astute class sub marine able to operate in secret across the world's oceans, these wouldal also feed a vital intelligence back to the u.k. we will complete the production of six 45 destroyers, one of the most effective multi royal destroyers in the world. we would also start a new program to develop less

expensive, more flexible, modern -- total naval manpower will reduce to 30,000 by 2015, that is a reduction of 5,000. and by 2020 the total number of frig etc and destroyers will reduce from 23 to 19. 3w thank you fleet as a whole will be better time take on today's task from tackling drug trafficking and piresy to -- >> the royal air force will also need to take tough measures to ensure a strong future. we have decided to trert hairier which has served this country so well for 40 years. it is a flexible aircraft but we should sustain the tornado fleet as that aircraft is more capable and better able to sustain operations in afghanistan. the manpower will also reduce to around 30,000 by 2015. that is a reduction of 5,000.

inevitably this will mean changes in the way some rement f. bases are used. but some are required to be by the army as some forces return for germany. we owe it to those up and down the country who have supported our country for many years. mr. president speaker, by the 2020, the royal air force will be based 5r7bd a fleet of two of the most capable fighter jets anywhere in the world. a modernized typhoon fleet capable of air-to-air and air-to-ground missions zwrinet strike fighter the wobbled's most advanced multi role combat jet. the fleet will be comp emeanted by a growing number of unmandatory vehicles and the transport aircraft with the c-17 aircraft and future strategic aircraft tanker craft allowing us to fly our air force wherever they need to be in the world. >> as we focus the forces, we

will remain vigilant lent among all possible threats. and we should retain the capability, we will retain the ability tolt regenerate those capabilities if needed and in the short-term, the ability to deploy airpower from the sea is unlikely now but in the future we will -- always be available when and where we need them, so we will ensure the u.k. has carrier strike capability in the future. mr. president speaker, this is another area where i believe the last government got it badly gone. there's only one thing worse than spending money you don't vaccine that is buying things you don't need and using them in the wrong way. >> they were uneffective to work with the united states or france. they had failed to plan so carriers and plains would arrive at the same time.

they ordered the more expensive and less capable version and they signed contracts so we were left in a situation where even canceling the second carrier would cost more than to build it. i have written confirmation from v.a.e. systems. that is the legacy we inherited and an appalling legacy every british citizen has the right to be angry about. we would not have started from here, but the right decisions are now being made in the right way and for the right reasons. lit take time to rectify these mistakes, but this is how we intend to do so. we will build both carriers but hold one in extended redness. we will allies to operate from our operational carrier and allow us to fwie

carrier strike version which is more capable, less expensive and has a longer range and carries more weapons and we will also aim to bring the planes and carriers in at the same time. finally, mr. president speaker, we cannot dismiss the possibility of a major direct nuclear threat to the i. tchament they that might not re-emerge. so we will retain and renew the ultimate insurance possibly our nuclear dethat's right guards our country around the block every day of the year. we have -- as a result we can do the following. we can extend the life of the vanguard class 10th first replacement sub marine is not required until 2028. we can reduce the number of operational launch tubes on the new sub marines from 12-8 and reduce the number of war heads from 48- 40, and we can reduce our stock pile the so called

initial gate. that will start by the end of this year. but as a result of the changes to the program, thal decisions to start construction of the new sub marines need not now be taken until around 2016. we will save around 1.2 billion and defer a further 2 billion pounds of spending from the next two years. so yes, mr. president speaker, we will spend money, but we will retain and renew a credible and continues dethat's right will stand constant guard over our nation's security. finally, mrs. , the immense contribution of our highly -- force sincere necessarily largely unreported. but their capability is recognized across the board. we are going our special forces

prepared to meet current threats and future threats and maintain their unique and specialist role. this enhanced capability will allow them to remain at extreme high redness. mr. president speaker, we were left with a situation we had a bidget 38 billion overspent, armed forces at war and overstretched and unprepared and i will equipped and the biggest budget deficit, mr. president speaker, i believe we have begun to deal with all of these and i demend statement to the house. >> hear, hear. >> mr. president speaker, may i start by joining the prime minister? paying tribute to the men and women of our armed forces. i also want to pay tribute to the families that stuss stain their loved one as they prepare

and serve and recover from operational service. they are the best of britain, and we should recognize that in this house here today. we must also ensure that their interests aral protected in all decision that is we make. can i also thank the prime minister for advanced notice of his statements. today's papers, yesterday's papers, sunday's papers, saturday eats papers, friday's papers. it almost didn't matter, mr. president speaker, that i got his statement at 3: sarks because i'd read so much of it in the newspapers. but i do have to thank the prime minister. i do have to thank the prime minister as someone who takes parliament seriously and the process of the announce ment of this review has been a complete shambles. and i genuinely hope you will learn the lesson from it. can i tell him the honest issues of national defense we will always seek to be

constructive. i believe the prime minister approach it is challenge of national defense as all governance has done with the right intentions and it does neither our politics or armed services any zwrouts imply any different and that is the approach i'm going to follow today. now the cuts today announce a significant cut in our defense spending but what counties is what the money does and what it does four defense and scooter needs, and that's way want to focus on tie today. first of all, i want to remind the prime minister of the concern by the defense ministry of the letter to him. 4 esaid, and i quote, this process is looking less and less defenseible as a proper strategic defense and security review. now the prime minister will know the concerns that the secretary of defense stretched. but by the chair of the select

committee, by many people in this house and by many independent observers. and is it not expected that the review of 1998 took 15 months complete and involved much more in-depth consultation and study. can i ask -- can i ask, can i ask the prime minister that this has been driven only by short-term consideration and on reflection it would have been bet tore have a long , continuing after this spending review? secondly, can i -- secondly, can i ask him about the most immediate and pressing issue of afghanistan and reit rate that we support the in addition afghanistan and working to both stable ties country or bring him up -- but first that he's been told by the chief of the

defense sthaff no decision announced today will undermine or -- in any way military operations in afghanistan. i also welcome what today's statement says about delivering new equipment. but can i raise with him the issue of extra helicopters? people will remember he made much the issue of helicopters in the last -- yes. in the last parliament? now order, as i understand it, was for 22 extra helicopters. but the document produced today says on page 25 that 12 new chinookal helicopters will be ordered. i simply ask him to explain the difference between the 22 helicopters i believe he wanted in the last parliament and the 12 that have been ordered. thirdly, i'm sure the prime minister would agree with me, that a key part of preparing for the challenges of the future is the targeting of the limiting of national resources

and he mentioned terrorism in his >> give than today's announce ment for yesterday ke assure the house that nothing announced tomorrow in the home office budget will undermine or weaken our ability to counter terrorism. fourth, on the issue of preparing our challenges for future challenges can i say we agree on the changes to be made such as the number of challenges made in the heavy artillery. however, i would like to seek reassurance from the prime minister that the decisions made today do not in any way compromise our ability to support current operations and defend our interests around the world. in particular, what does the second-placeibilityal act? for our fourth projection which was made much of in the national security strategy

document yesterday. 7 and what does it mean for our ability to defend our -- territories? in that context can he also reassure the house that it really is the case the best strategic decision for the next decade is for which is the decision he has announced today. can i also ask him about two things he didn't mention in his statement. can he confirm what he did not tell the house but what is in page 19 of the review that he is announceing a reduction in the amount british can deploy and about the huge disappointment that will be in south whales following a statement this morning to terminate a defense training facility in athens.

there will be concerned of this review. the important future is -- all sides of the house support the deterrent alongside protest of multi lateral dis armament -- but can i say -- but can i say -- but can i say -- i apologize. mr. president elwood these constant sedentary heckles are not necessary, they are not welcome and they don't help you. >> but can i say to the prime minister that, it will be confirmed that he announce it is whole range of -- despite it was not part of the review and he made much the issue of the poe curement budge net his statement but by choosing delay he has created an unfunded spending commitment, a large unfunded spending commitment in

the -- [background noise] >> oh, yes. oh, yes. he has created an unfunded spending commitment in the -- in the next parliament precisely the problem he told us he wants to get away from in procurement. mr. president speaker, we will help the prime minister and the government as he seeks to do what is best for our country but many believe this is a mis -- it has been chaotically conducted and hastily prepared and simply not credible as a -- to defense needs. on this part of the house, we will support him where we can, but we will also give his strategy serious scrutiny, and where necessary and appropriate, whether he sfudge principalsed opposition it

deserves. >> anyone who does my job or the ministry of defense knows that we have in our armed force it is bravest of the brave. some of the most professional and dedicated people and everyone i know in this house looks item to them and is proud of them. can i welcome the honorable gentleman because today was the t.u.c. rally. he promised to attend. i'm sure all their trade union will fully understand. he complains that i hadn't got -- i did get the document to him two hours ago. something i don't remember doing, but here we are. now i may be being unfair. i thought the right ole gentleman should have started his statement with one word, which is sorry. sorry for the 38 billion pounds of overspent money in the m.o.d. and the fact that they

left more civil servants than we have -- and sorry for the completely unsustainable promise that is they made. he asked a series of question, and i will try to answer every single one of them he compared this review with the 1998 review but it did not indeluped funding to go with the promises that were made. yes, we made tough decisions but the funding is there to feet in changes. and he said this was all about short-term considerations. i have to say we have made some long-term decisions to invest 650 million nounds cyberat a time when you're making cuts is a long-term decision to sort out the future of the carriers, that's a long-term decision. the scrapping of many tanks and heavy artillery. these are huge but long-term decisions and his idea that we should take longer over it.

i have to tell him these decisions don't get any easier by simply putting them off 79 we have had a proper process, a national security process, and i note during his leadership election, he said i think there's a strong case for carrying out our own strategic defense review so we can give appropriate scrutiny to the government's plan. well, i haven't seen that review. perhaps it will emerge eventually. . . the next question is about beig

able to produce 30,000 forces. i put that in my statement. let me address the issue at the capability that. this has been the most difficult issue for the government to take. there is a gap in the flexible

posture. we have the ability to deploy it boys are around the world. i expect there is when's appeared at the alternative would be to keep the carriers, but not to keep the tournedos. the harriers would have to be in afghanistan, not on an aircraft it is not as difficult as the tornado. there will be questions whether i belie the premise underlying the question is not right. the current carriers are not equivalent to the future ones we are building. i have to say, why not try to keep all of these things and develop joint strike fighter would be prohibitively expensive. the sort of decision was taken and the last parliament to push these meetings off to the future. you have to make the tough decisions now to line up our

forces for the future. the last question -- i have been sitting back up for the end i was so excited by his questions. we held a value for money review on trade riden because we wanteo see what money we could save. that is money available to invest and other things and does nothing to risk our replacement. i have to say, that trident is vital to our nation's security and a proper and full replacement is the right option for the future. in this is responsible decisions well made. and i have to say to the gentleman who is now running away from the replacement that he supported, i think it would be a profound mistake for this country. >> a great many hon. members are

seeking to catch my eye, and as always i want to maximize the number of contributors, but brevity is likely to the challenges of doing so. that the prime minister understand that though there are many that will be with great concern the decisions -- >> this would be after the general election, when for all we know the minister's may still be there in cabinet. [laughter] having been life-long opponents, will continue to try to veto it. this decision looks like the subordination of the national

interest, the political expediency at keeping--- -- [yelling] >> order. it is courteous to listen to the prime minister. >> i really can assure the gentleman. i am very strong supporter of replacing tridents. we have sought the best military advice for what is best. the pact is because we have been operating in the vanguard submarines for many years, we know what they can be. we know it is absolutely right to go through the initial date this year while we are spending money and to go through the final date of commissioning the building in 2016. we are on track to replace tried and and have a full-service nuclear deterrence. it is the right decision. -- we are on track to replace

trident and have a full-service nuclear deterrent. >> thereby increasing the expenditure. he has also cancelled the nimrod aircraft. rendering a nuclear deterrent < vulnerable. how is that sensible, never mind strategic? >> first of all, let me answer the gentleman's last point. what we are proposing would be no reduction in deterrence. that is vitally important. " we have done -- i have to say, we set out that we are committed to trident's prue replacement, but we have asked the minister of defense to look through how we can extend the life of the existing submarines, work on the replacement, and make sure you have continued deterrents all the way through. these are the sorts of questions

the last government should have asked. it would be irresponsible if you want to have a full-service nuclear deterrent but you will not value for money. that is what you should have been asking about. >> it may offer the prime minister some comfort that i welcome the proposals in relation to trident. they're consistent with a liberal democrat position. they also make an important contribution to multilateral nuclear disarmament. and between now and it doesn't 16 we will continue to pursue opportunities for multilateral nuclear disarmament and also investigate the possibilities for greater military cooperation, including nuclear cooperation with the french. the >> of course we will continue to look at our responsibilities to in terms of

nuclear disarmament, which we believe can be done on a multilateral basis. and of course we should look at cooperation with the french. to anyone that years as a " for the army, i feel it is -- to anyone and that feelthat feels a cloacckloak for the army, i feet is opposite. i know the liberal democrats are absolutely entitled to use the time between now and 2016 to look at alternatives. i have to say from looking at the alternatives, i do not think there is anything that gives you the assurance of having a false service nuclear deterrent with the trident submarine.

it is free under our agreement for him to continue to look at that. the program for replacing trident is on track and going ahead. >> mr. speaker, the prime minister has announced cuts and deferred defense decisions today, and tomorrow the chancellor will announce cuts to the fore and commonwealth office and bbc world service, yet the national world security center says the national security council has reached a clear conclusion that britain's national interest requires us to reject any notion of the shrinkage of our influence. given that statement, it isn't the national security structure not worth the paper it is written on? >> can i suggest to the hon. gentleman and noble idea? why don't we start looking at what we get out of the public spending rather than what we put in?

what he will see in this strategy is we're actually making sure of where we're getting the things we need for the army, navy, air force. that is what you have to do at a time when you have such large deficits and such a large debts as we do, but you can see the priority this government gives to defense and to national security by the decisions we have taken. >> [inaudible] may i commend the prime minister and his colleagues for insuring that where reductions in defense capability are incapable at this moment, many of them will be able to be reversed if our economy improves and the resources increase, and may i also suggest the whole house of should welcome the prospect that we consider 700 million pounds on trident without interfering with continuing deterrence.

is the prime minister satisfied that the technical evidence that is being given supports that conclusion? >> i think the gentleman for his question, -- i thank the gentleman for his question, but i want to be sure that someone who has the support that i want to make sure we have deterrence, no break between the vanguard submarine and what will follow, and i am satisfied with all the evidence that i assume that that is what we will get. the reason we have been able to do this is the vanguard submarines have been operating for longer. so it is possible to continue with the independent nuclear deterrent and its replacement without breaking capability. >> mr. speaker, thought must go to servicemen and subversive womeservice women in the countr.

if both these bases close, it will mean a 25% cut in the uniform service as a whole. given that it will cost more to close it and maintain it as support database, will he or the secretary of defense meet me to discuss this? >> the secretary of defense would be happy to meet with the gentleman. we're not announcing base closures today because there are more on service personnel coming home from german it than there are people losing positions in the announcement taktoday. i hate to make too much of a political point, but one does wonder how many bases there would be if there was an independent scotland. and >> i say to hon. gentlemen

[inaudible] >> we will give the review very close certainsquinty. it seems to provide stability in the long-term, but how will my friend and to those who say they will if we can get away with no fast jet aircraft carriers for 10 years? why do they need them at all after 10 years? will be defend the defense budget against such attack? >> i think this is absolutely the crucial question in the one i've spent the most amount of time on. i think in many ways the politically easier answer would have been to pretend we do not have a carrier strike collaps gt

militarily that would be the wrong thing today to do. and in afghanistan that carrier did great work, but the tornado is more capable. -- in afghanistan's the harrier did great work, but the tornado is more capable. we have a friendly basis, we have allies, it is not easy to see in the short-term the need for that sort of carriers' strike. we cannot rule it out for the long-term. i think a good decision is better than a bad decision with what we pretend is no gap, but there is a big difference between our current carriers today and what we will have in the future with the joint strike fighter which has a far- longer-range.

the right military answer is the right thing to do for our country. >> the prime minister will know that the country's only remaining factory for the manufacturer of battle tanks and heavy fighting vehicles is located in [inaudible] . will he say what the implications for the factory are in today's announcement? >> clearly we do, and i think everyone would accept the need to get away from the cold war tactics. i think the statement as a whole is extremely positive for britain's industrial base in terms of things like the joint strike fighter, which we have issued participation in. and the shipbuilding that will continue on the clyde. obviously we need to retain key

sovereign capabilities. whinney to ask in each case what is necessary? we need to maintain a number of tanks. we need them serviced and workable because you cannot predict any future conflicts. >> may i welcome this review, and particularly the careful analysis that has gone into it, and the conclusions, but what the prime minister agree with me that this is just the starting point for what has to be a fundamental transformation of defense in this country. so that in 10 years time we will indeed have a defense posture and capability capable of securing the way ahead for great britain? >> this has a vision for what our forces should look like and 2020. -- in 2020. because we can now see what the budget is for the whole of the

spending review time, they can make proper plans and also tried to drive a efficiencies through the ministry of defense and get even more for the money they have set up. the second thing is we must have reviews every five years. the problem has been that we had a review in 1998 not properly funded. we need regular defense reviews, and that is what we are committed to. >> dated tweed. >>-- david tweed. >> i believe, along with our nato partners that there is a clear program for training afghan national army and police so that they should be in the lead by 2014, that is our aim.

i have said in addition we should not be in the major combat role, and i have to say to him, but then we would have been in helmand province of longer than the entire second world war. i simply do not expect that taking the long-term decisions about the defense of our country, making difficult you i- defense. i would say quite opposite. i am passionate about our armed forces, but you do not serve them by putting off decisions to the future. >> mr. roger williams. >> think you, mr. speaker. the appointments of the matrix as the preferred bidder for the project had been terminated. it is a disappointment for the armed forces who need those facilities and a disappointment

for wales and the welsh economy. the statement goes on to say alternative options will begin as soon as possible. can the prime minister give us assurance that the site will remain prominent among the options? >> i absolutely can give him that assurance. what happened is the current program is not affordable as currently set out. this is not the end of the road. there are straining that takes place there now. everyone knows that they need to train together why, and state actions is perfectly positioned for that. -- and the athenst. athens is py positioned for that. >> [inaudible] those are all due for refacing

deficit reports. without that, 3000 jobs are our rest. can you tell the house what discussions he had with the band's industires prior to this announcement? >> i know the hon. lady has a very strong constituency issue with us. perhaps i will be able to get back to her with this program. clearly the number owill come down to 19. in terms of what will happen in the future, that is a decision that has to be taken on the basis of what is the best platform for the use of helicopters, but i think the best thing is as we go to the details we can tell her more about what will be fundamentally good news for both plymouth and portsmouth because we want to keep both naval bases.

the communities there are hugely supportive of our armed forces. >> thank you. can i commend my right hon. friend to adopt a more thoughtful and a strategic approach. has he had a chance to read the reports on who does the u.k. national strategy in which the outgoing c.t.s. commented that the u.k. have lost an institutionalize capacity for and culture of a strategic thought? , does he agreed that we need a more coordinated approach to strategic thinking? and will keep adopt the recommendations of the report? >> i absolutely agree with what my hon. friend says.

people can see the defense review clothes from strategic thinking about anbritain's place in the world. i really do think the national security council and national security adviser, i do believe this is working well to bring the government to the other end really think about what our strategy should be and what that means for the decisions we have to take. it is much better than of battle between the ministry of defence and the treasury. >> it says that savings can be made in this parliament. but it cannot be said with increased costs overall will be by delaying it this way and how this needless risk of uncertainty is showing leadership in the long-term interest of the country.

>> this was a value for money exercise and we're driving costs out of the program. overall we believe will be less expensive. also the good news is that the submarines are going ahead. we will consider the fact that this government supports the replacement went to own party is going soft on the edge. raging she will -- he will also have to consider the fact that this government supports the replacement when his own party is going soft on the issue. >> he could do that even if he wishes to delay the introduction of the system of no extra cost. will he explain what reason he has for delaying this vital boat into the next -- vital vote into

the next parliament? >> i have worked with my hon. friend for many years. and i know he takes an extremely close and professional interests in this matter, and i have to say i remember when there was not a single supporter of nuclear deterrent on the bench. and a great service he made to this country. the military advice is the need to go through the main gate and not earlier. let me make one more frivolous points. i am not as lacking in confidence as he is that there will be plenty of support in the next parliament. >> given that the prime minister has made the point in his answer a few minutes ago, can i come back to the question that has just been asked, why is he afraid to put this to the votes for 2016?

>> i really think i have asked this question. -- i really think i have answered this question. and we're going through the initial date this year. a anyone wants to hold a vote in this parliament, they can hold a vote in this parliament to check that we go through the initial date. i question the position of the party opposite, because the leader of the party said and i have been clear, i believe the right approach is to include a replacement in the defense review. he is not automatically committed to the full replacement of trident. and >> i welcome the decision that we will build the new carriers. can the prime minister confirm that portsmouth will be the home and the navy can meet its commitment for 2019? >> i can say yes to both of those questions.

particularly the second question, which is do we have been able assets to meet the task we have an terms of piracy, combating drug running patrols, and yes, we do have that capability. that is on the record. >> the prime minister announced a reduction in 7000 in the army. will he give assurances will not include front-line infantry units like the ones currently deployed in afghanistan? secondly, i welcome the review of the armed services. will the prime minister give an assurance that that review will seek to expand the role of the reserve forces n.y. in support of the regular forces going forward? finally, in relation to the threat from republicans, will be assured that the police service receive the support they need?

taco>> very ingenious. the minutes to get around the restriction on questions. no infantry regiments will be abolished or scrapped as a result of the review. as a reduction garmin numbers will be achieved by reducing the number of headquarters, particularly the regional headquarters. there will be some impact on logistics and artillery, but no infantry battalions will be ordered. i was intrigued that we look quietly at what other countries are doing. -- look widely at what other countries are doing. i do not think we have done that work yet, and that is why i am sick and out of the defense review. on the issue of northern ireland's the assurance that i can give him is that the last

government made a number of commitments. we will continue with those. we have had a discussion in the national security council, about these issues and how we best tackle the threat of a dissident republicans. we will continue to give this our highest attention. we put it as one of the highest priorities for our country, which i think is right. >> there royal navy has the build a number of deployments around the globe for many decades. can he reassure me that with the reduction, there will be no reduction in the number of the world navies commitments? >> there royal navy has said it is up willing to undertake its part with the laydown of destroyers that we have a. we obviously have the new destroyers that cost around 1

billion pounds each that are coming into service. we will have a less expensive models that will be coming forward as well. we're having to take some difficult decisions. one argument we need to develop is the money we have spent through the aid budget. we talk about natural disasters and our role in trying to tackle them. >> the nuclear non-proliferation treaty permits this country to long-term nuclear disarmament and take steps to achieve that. the prime minister announced nuclear disarmament at some point in the future. is this illegal in terms of the treaty, and how much money isn't actually going to cost us to develop another generation of weapons of mass destruction and the world's needs peace and of nucleaa nuclear-free world has s

well? >> i did not come to the house to necessarily make hon. gentleman happy. and the good james gray. to com-- >> james gray. >> will he accept communities are absolutely ready to exit soldiers into the base, and will he accept that the basis of [inaudible] >> the hon. gentleman for many years has stood up for a line with the bigger and tenacity, and i commend him for that.

it is a good opportunity to put on record the respect for everyont everyone has for them. he has made a good jussuggestio, and ensure he can pursue it with the ministry of defence. >> there are human cost in the 42,000 jobs that have been announced as being loss today across ministry of defense and across the military. can we have an assurance that those people that are losing their jobs and those that will lose their jobs in the defense industry will be given to help and support to relocate, that the housing needs will be

address given the cuts that have been addressed and housing in the last few days? can we have an assurance they will not be discarded? >> i can absolutely give the lady that assurance. i can also confirm what has been said before, but urges that we will not be making anyone redundant that is in afghanistan or units in afghanistan. . in terms of the industrial units, of course there will be in tax but if you look across british industry as all whole and look at the ship-building decisions and many other decisions, there is a strong future for defense manufacturing in our country. let me put on record how much we should value the m.o.d.

civilians. many civilians working as long side the military counterparts coordinating our efforts in afghanistan, doing a fantastic job. we have to make sure we do this in a sensible way. tacom>> could i think the right. friend for the honors he has done in putting this in front of the commission? can i say i find it deeply humbling of five colleagues and i have been among the 27,000 men and women left onto serv and afghanistan as reservists over the past eight years. could i ask my hon. friend, as he thought the loss might be put on to this commission? >> can i thank my hon. friend

for taking part in the square eggs i think my friend should be the deputy. general willi lamb has agreed to serve as well. i am afraid my p.p.s. will not be available to serve in this capacity. >> can do. given that a nuclear attack on the u.k., can i ask the prime minister if the government will delay to allow a full public

review of the assessment of nuclear weapons? >> i think there will be a continuing debate in this country about nuclear deterrence. i have been to the arguments a thousand times in my mind, and that always come up with the same answer that in an unstable and uncertain world, it would be a profound mistake for britain to discard our nuclear weapon. this debate can always take place in this house. i think my party has a very settled you on edge. -- view on this. >> mark lancaster. will the government matches its commitment to prevention but the civilization units and the reserves and the military's position support group? >> i think my hon. friend who has served in afghanistan himself. we should pay credit to him for

that. and the whole point of taking the issue of the reserves out the review and have a set look at is to answer the exact questions he is putting. it is right to try to develop units were repairing the military and civilian unit together. so that when you go into a community you can start to get things done. anwe need to make sure we are properly equipped to deal with that. >> i have always supported the case for greater conflict prevention, but conflict prevention needs to be understood and practiced by the military themselves. how will the prime minister guarantee there will be proper focus on women, children, and achieving the goals it one-third of the budget should be

reallocated to conflict prevention, which is something quite different? >> i was a conflict that affects women and children, and it is broken states that have the worst records on poverty and development. far be it from me to recommend reading this to the hon. lady, but i think it accept the case for reducing the budget. yes for vaccination and malaria reductions. we're mad, i think, if we do not put money into mending broken states were so many of the problems of poverty come from. >> we have a world class workforce building world-class aircraft. i need your government to really get behind the system and ensure we do everything we can to ensure that those of aircrafts succeed in a highly-competitive world market.

>> i strongly support our defense industrial base. i think it is one of our great industries and also of great export earner for our country. we should support it. let me say this. i checked the figures we're looking at how to make this very difficult budget situation work. we're spending 17 billion pounds with the systems between 2011 and 2015. just as this behooves us of a government to spend responsibly and think of our industrial base, so they must make sure we're getting value for the money for the very many millions we spend. >> i find it strange the prime minister made no reference in his statements to the defense training academy, and then fail to answer a very direct and simple question from the leader of opposition. has the prime minister not been told that the academy is cost- effective, that it deliver

savings and will improve the quality of training for our armed services. how does it make sense to ax this? >> this is what the defense review was about. the current view is it is not right and not working. that is why we do recognize that afghans is a great base for training. -- athens is a great base for training. we need to have another look to make sure it is right. that is what is clear to happen. >> i welcome your commitment. can you confirm that the final commitment will be placed? >> we are supporting and upgrading your advice because it

is important has grand attack capability. what is set out in this document is the total force of joint strike fighter we anticipate having as part of the 2020 joint force structure. hous>> when you're trying to gen on the field, they ask the helicopter to drop the helicopter. [inaudible] >> i do not think it would be rights to exchange operational points through the house of commons, but i'm happy to look into the case. i think the prime minister for his commitment to the aircraft carriers. i am very grateful for that. is he in a position to confirm

that my constituency continues to play a major role in defense of the country and will be a premier naval force? >> i can absolutely confirm that. the decisions we make through this process will have an impact on portsmouth. we want to work provosts -- we will have to work through those. i can confirm that i think fundamentally it is good news. >> thousands of aerospace workers across lancaster, including hendon's in my constituency have worked at bae and want to know what the practical and implications of these joint strike fighter and the carriers are. could the prime minister -- since he has already given as an

ambiguous answer to predict now give us a more substantive answer as to whether he is corn to support the development and investment? >> it begs the point that occurs all of these things were all labor policy. that is the problem. there was no prioritization. there was no sign of how we report to pay for any of it. it is a difficult thing to come in and work out what you cannot keep. that is what we have had to do. this is the start of the process in some ways. you can see how many jets we anticipate having by 2020. there is extra money for unmanned aerial vehicles. i think anyone who has been to afghanistan knows this is a capability we should beat investing in. you cannot invest in its a must

make difficult decisions anywhesomewhere. >> one of the fundamental problems of the last eight to 10 years has been the split between parliament policy and defense. what the prime minister tell us what steps are being taken to make sure the joint intelligence committee is doing to make sure we have the right resources and priorities? to co>> it really has struck mer the past few months that when it comes to issues of how we respond to the pakistan floods, and what we do in helping haiti, how we go through the defense review, what is the future of the development program, the fact that we have the foreign office the environment secretary all sitting around a table discussing it, means they are not being decided in silence.

there is a lot of the ministry of defence does that has a huge impact. the fact that we're all working together in a much more positive way been done in the past, i think solves the problem he alluded to. >> can the prime minister confirm whether or not the stockyard reap its borders between now and 2013 will be going ahead? what does this mean for the work force elsewhere? will we simply see a continuation of the policies? >> for a government that is going ahead with building both carriers, that is not exactly gratitude. queen elizabeth is not being put back in terms of its manufacturing. what is happening is that once manufactured, we will give it to

the operational carrier in order that it can then work with carrier version of the joint strike fighter, which is a better aircraft. it will make it fully operable with our close allies. there's not a delay, just extra equipment that needs to be added. >> will support for the plymouth naval base be supported? does he agree they have a glorious future in serving our country in the future as they have in the past? >> i can absolutely give my hon. friend that assurance. and they have done a fantastic work for us and the past years. there is not a reduction in capabilities. clearly there will be some

looking at how we can mixturakee there is not top heaviness. i have employed one as a private secretary. to >> [inaudible] >> yes. >> mr. speaker, the national security strategy yesterday and the prime minister today emphasized threats and communication. the prime minister will be aware that there was service training in communications and information systems at the defense college. therefore, the three dozen people that depend on the jobs for that welcome the secretary of state's announcement this morning about the metrics decision.

can the prime minister assure me that the decisions on defense training will be based on centers of excellence and not political considerations? >> all of these decisions should be based on proper military logic. that is what we want to do. >> can i speak to the prime minister's question on the training in athens. there will be profound disappointment at the cancellation. and could he tell us, he has referred several times today that it is not being right. what is wrong with the exactly? we found it to be a good value for money. >> the contracts that have arctic and that will continue to completion, but new contracts will not be started. we continue to believe that technical training on as few

sites as possible remains the best option. this was done so for very good reasons. those reasons remain. that is why i have said this is not and never wrote fthe end of. athens. >> the talk of a corporation with the french has went into the stands. will the prime minister explain how she will drive this process for personally with president sarkozy? >> i am so delighted that someone with skeptical credentials makes the point that i do that this is a worthwhile thing for our country to do. what has changed is president sarkozy is extremely keen on this defense relationship, and

we both face the same pressures. we both have a full-service armed force. we both have very effective navies and air forces and troops that can make an impact on the ground. we both want to maintain and enhance capabilities. i believe to gather there is a huge number of things we can do. i am working on a program with him before the summit upcoming, and i'd think you will be pleased with the results we're able to deliver. >> the 2010 gdp pledged is not include the course of afghanistan. and to go what i can confirm on the natal's figurto figures, wee comfortably ahead of the 2%. it does include obviously your current military operations and also includes other military

expenditure. it is all set out, and i can give him all of the figures i have seen. fundamentally in terms of gdp, we are the third highest in nato after the americans. third is the u.k. ahead of france and the others. >> i welcome the prime minister's considered statement and his support and reference to cyber security. does he agree with me that it cyber security is to be effective there needs to be a real and a working partnership with the private-sector, in particular when looking at a critical national infrastructure? >> you are absolutely right. this is not about some big government organization. and has to ended with private organizations that have the expertise. when the government comes up with a new program, everyone suddenly becomes in favor of extra cyber -- they want to make

sure the money is well spent. >> and drew miller. >> perhaps the prime minister answer a simple question. he refers to more flexible, less expensive. i know she would not want to point out any risk, and therefore the ships will have the same if not better defensive capability. will he now describe what this looks like? to go out there will have a range of capabilities. -- >> there will habe a range of capabilities. when you look at the tasks we want than royal navy to come back in the future which does include piracy in drug running, there is a case for saying that

future program should actually be less expensive and more flexible, and that is what the commission in process will try to deliver. >> standby. -- stan kelilein. >> does the prime minister agree that will only be possible to rebalance the structure's going forward within this spending envelope if we get to grips with the disaster we have inherited? >> order. one question is more than enough. >> we need to get peter levine to look at some of these issues. >> thank-you, mr. speaker. two years ago if jobs were

threatened with the defense exercise. the new armed forces minister join with me to force a labor government into whata u-turn. >> we have not made decisions about that yet, but you can see the overall laydown we've set out and turns of the program we will retain -- in terms of the program we will retain. >> one of the problems with delaying decisions over the year is you end up with a military strategy that does not meet the modern threat. will he agree with me that for the future what is vital is to have a flexible and adaptive a strategy that means we're up-to- date with the modern technologies, whether it is action in cyberspace or all these other technologies? >> i think the gentleman is

right. one of the reasons for having the review is we force ourselves to ask the difficult questions, and where you can bring forward a program that has been delayed, you should. and we need to replace the aging transport fleet, and the sooner, the better. >> could he tell this house how many fighters key will be ordering, and whether or not he will be ordering the joint strike fighter for new aircraft carriers? >> we aim to have 110 typhoons by 2020. the figures are set out in the document. the balance is something we have to make decisions about. the general jet, the typhoon and the joint strike fighter, and i am sure that is the right strategy.

>> many will welcome the uncertainty that has been removed from the prime minister's statement today. they will have great concerns about the underlying statements. when will they finally get information about what will say what will be cut? >> the hon. lady makes a great point, because we have not announced the full change of allowance. we are seeking savings. this will involve difficult decisions. army coming back from germany -- the army coming back from germany, currently we spent 250 million pounds for year for the allowance for the troops in germany. honestly having the back at home will change the cost structure. we will make further didecisions on this.

>> it took long enough. can i clarify whether or not the cuts will delay in any way of their production of the carriers and have any jobless applications? -- and have any job cuts affect? >> the most logical step clos wl to be to put it to the carrier. we would have solved one of the inherent problems of bringing the things together. clearly an alternative would be to put it to the second carrier. the most logical way ahead is the one i have set out. >> mr. speaker, it seems that my

constituents and many of the members and the chamber -- members in the chamber are disappointed that the metrics will not go ahead. will he confirm and make available some of his officials to provide a detailed breakdown? >> i am very happy to do that. i know how strongly people feel about this in sidewheels. i know how important this decision is, so i am happy to make this available to explain the thinking. this is not the end of their road in athens. i think he can continue to fight hard for his constituents. >> since the review was so well regarded, and his thinking shaped nato strategy for a

decade. the next one goes to the new strategy. what is new enough and strategic enough for this defense review to shape nato policy over the next decade? >> i think there are a number of things that are new. i think the emphasis on a national security, the emphasis on cyber. the fact that we have prioritize national security tasks is quite a high risk of things that happened. we have taken some risks with this process. i would also say the structure and equipment is making a more adaptable and flexible. that is something as well. -- i would also said the structure and equipment is making it more adaptable and flexible as well. and >> our troops deserted a

great support, and in part they have suffered from lack of equipment and numbers. can the prime minister guarantee that this review will not only ensure there are no cuts in support, but increase support should our troops require its in the future? >> absolutely. you cannot entirely instigate what happens with decisions made all sport and the defense budget. as i said in my statement, and i wanted to get this in, any time the chiefs of the defence staff said that decision and impact afghanistan now or in the future, for instance, whether to go ahead with the rebatfit, i me the decision to go ahead with the refit. that should be our first concern. they are on the line every day for us, and i never forget that. >> i am still not clear, perhaps

the prime minister could answer -- is there a future for the defense training academy? >> fundamentally, there is a future for defense training. we need to make sure more is done on a tri-service basis. athens is uniquely qualified for that. we have to start again, but this is not the end of the road. . .

>> i think he is completely wrong. we have to get these decisions right for the long term. a politically easy decision would have been a militarily wrong decision. that is the place to start. >> last week the public accounts committee heard from someone who said that the lack of a strategic review over the last couple of years has made the situation and the conflict more difficult. i welcome the prime minister's

assurance that there will be a strategic review every five years. what can he do to ensure that this awful position of a review every 12 years and never happens again. >> there is a provision for similar types of reviews in america. think of all of the things that happened after 1998. all of those things happened and there was no defense review. >> could you tell all of the people in scotland to what the future is before -- future is for r.a.f. in scotland?

>> we will look at all bases to see what can be done. it is important that we consult with all of the communities who have given so much support to our forces over many, many years. >> this statement has been allowed to run a rather long the than is customary but that is because of the enormous importance of it. but we must make progress. i could never forget the honorable gentleman and i would not try. >> we will leave this at this point to go live to a discussion on that the defense industry and security spending with the president and ceo of northrop grumman. >> the defense industrial initiatives group is dedicated to the study of defense resources, programs, management

and industry. our focus is on fostering public discussion on critical national security issues and topics. it is therefore our privilege today to host our speaker and we are most grateful for that opportunity. wes bush is the president and ceo of northrop grumman, a role he accepted earlier this year. he carries that role with the distinction that has become less and less common. he has a technical background as an electrical engineer. prior to becoming ceo, he was president and chief operating officer of northrop grumman. he was president of the space technology sector. he has also served as chief financial officer. the technical background and the financial background are important, because the u.s. defense industry serves two very

different communities. on the one hand, the nation's security depends upon their technical excellence and superior innovation, and it always has. on the other hand, global financial markets demand a return on investment that is competitive with counterparties in less demanding realms. reconciling these two demands is no easy task. it requires the skills that mr. bush has. we are pleased to welcome mr. bush and northrop grumman, our neighbor. after decades of being in los angeles, northrop grumman is moving its headquarters to the washington area, in part to be able to respond better to the partners in federal government on the national security sector. there is actually only one city in america that has worse commuting traffic than

washington, d.c. you are going from the worst to the second words. i ask you -- second worst. i ask you to please join me in greeting mr. bush. [applause] >> thank you, david. i appreciate the opportunity to be here today. we are looking forward to being a new neighbor in the d.c. area and to getting that under way pretty quickly. we hope that this winter is not a reflection of last winter, as we are working hard to recruit los angeles based people to relocate to the washington area. i appreciate the opportunity to speak about the defense industrial base and some of the challenges i see for us on the horizon. i think you all know that our

defense industrial base is the fascinating product of key strategic decisions that have been made over many decades by policy makers, technologists and the capital markets. i think david said it well in terms of the convergence of the three major players that have to come together to make this work. is also a reflection of the core strategy that we as a nation have adopted for our defense. that strategy has at its foundation an extremely capable padre of a well trained, equipped and dedicated service men and women who are enabled by absolute technological superiority. i think the department of defense does an extraordinary job of recruiting and training in environment where dedicated men and women are able to superbly serve their country. it is the job of our defense

industrial base to ensure that they are always equipped with the very best defense capabilities. our ability to meet that challenge is being confronted. the defense industrial base must reflect its role as a strategic asset for our nation. it is critical to our nation's security, to our technological standing in this technological age and to the hundreds of thousands of americans that it employs. for the next few minutes, i will talk about the base, about the pressures i see on the, about the choices facing those deciding its future, and about the implication of those choices, because sometimes those are not so clear up front. when you stand back and examine the changing threads that our industrial base has had to address since the end of the cold war, i think you will be

struck by up resilience to the base has been -- struck by how resilient the base has been. during the cold war, it was pretty easy to spot who the bad guys were. most had governments, armies, navies, air forces that we could analyze and figure out pretty perceptively how to counter. things have changed in a big way. one of the changes was perhaps best summed up by a marine general back in the 1990's. he had a little bit of insight into the future. he said it would be characterized by three blogger wars. on one block, our forces might be -- three block boriwars. on one block, our forces might be training military recruits.

on another block, they might be fighting insurgents. on the third block, they might be engaged in humanitarian efforts. it is interesting how perceptive that statement was. in the future, we need to prepare for more of that. we all see that on the horizon. we also need to prepare for potential adversaries who seek to acquire nuclear capabilities. those capabilities could be acquired by states or by stateless terrorist organizations. the threat of cyber-attack by unknown actors threatens our defense capabilities as well as our core infrastructure and perhaps the very bank accounts of our citizens. we also face multiple regional instabilities that could boil over at any moment, threatening our nation in the process.

the whole notion of how our nation defense citizens and our interests has changed. yes, there will certainly be a body of an during security needs that we will always face. we will always need to be able to ensure that we have effective military dominance through strategic determine -- strategic deterrent and global access. in addition, we must apply tools and solutions that address the needs of what we call the global commons. it includes more than the familiar geopolitical hot spots. it is now a global commons that includes cyberspace and oftentimes is reflected to include energy, food, and water rich areas. this is a time of a world population that continues to grow in numbers every year.

many parts of the world continue to grow in desperation every year. many parts continue to grow and technological savvy every single year. in short, the dynamic range of threats facing our nation and our interest is unparalleled in our history. at the same time, our defense industrial base will be called upon to find those needed solutions as we are focused on tremendous pressures on the nation's investment capacity for defense. certainly, we and the defense industry need to do all that we can to provide the most cost- effective systems capabilities. we at northrop grumman have been working hard to reduce overhead, streamline our organization, increase productivity, doing all of the things that you would imagine would help to provide our customers with the very best value possible, and our

investors with an attractive rate of return. the industrial base did not spring for it in a vacuum. it is an extraordinary product of the capitalism that has forced america's economic might, capitalism that is the most successful economic system and recorded human history, and won the rewards initiative, merit, foresight and risk taking with higher standards of living. it is easy to forget that a little bit when you pick up the newspaper every day and read about the tough times and recessionary effects that we are all feeling. but even today, despite our economic challenges, the american free market remains the most powerful economic engine in the world. be a defense -- the defense industrial base that works within that system is still unparalleled as a strategic

asset. we have every opportunity to extend the supremacy of the base well into the future. but maintaining that leadership will require thoughtful and determined action. so, let me touch on some of those necessary actions. part of the industrial base is and always has been much more about people and innovation than it is about facilities and production rate. database draws on three principal sources for its strength. -- database draws on the three principal sources for its strength. -- that base drawings on s three principal sources for its strength. those customers include the defense and intelligence communities, the emerging homeland security base, congress and the american taxpayer. i will be back in just a moment to talk about another important customer, the international

customer, our allies. secondly, we rely on technical and management talent to drive the innovation that creates and enables technological superiority. third, like other industries, it relies on the capital market to provide the investment financing required for the large-scale undertakings that are characteristic of the defense industrial base. all three resources must be engaged, robust, and committed to achieve the outcomes upon which our national security depends. i think we can see that there are clear risks in all three of these areas. as economic conditions place more and more pressure on government spending, the customer's appetite for new innovation can receive. it takes great discipline to preserve that innovation at a meaningful level required to support a long-term industrial base. without the customer's commitment to innovation, not only is news science -- not only

do new scientists and engineering graduates avoid our industry, but we lose talent we already have. we all know that capital markets are very savvy. they see a direct relationship between innovation drivers and return opportunities. when they sense a decline in the former, they presume a decline in the latter and they invest accordingly. the three components, customer drive an investment for innovation, the ability to attract and retain talent, and the availability of capital, all must work together to make the defense industrial base strong and capable of fulfilling its mission as a key element of our national security. so what can we do about these

changes? there are a couple of things that i would like to focus on today, a concept that i think are going to be important as we move forward. i do not claim that these are the only two things we will need to do, but i think they are important actions to have under way. first, let's talk about capabilities. the government customer has to make focus decisions about what capabilities are key to the success of our nation in the long term. they need to work closely together with industry to create meaningful approaches the drive the continued evolution of that capability. a good example is aircraft design. once the fighter program completes testing, america will not have any large scale dod unmanned aircraft programs -- manned aircraft programs in development or perhaps on the

horizon. this is unprecedented. in the 1950's, the united states initiated 45 new aircraft programs. perhaps there will eventually be a long-range strike program that will fill that void, but what will the aircraft designers do until that program comes along? there are many other examples where a lack of new programs could have a devastating consequences on our resources or human capital. speaking as an engineer, i know very directly that for many of our critical skills areas there is simply no substitute for actually building something. we have to be building things to maintain the capability. if we do not have new projects, those skill areas will atrophy. reacquiring those skills sometime in the future will take, at a minimum, a lot more time and a lot more money than had we made nominal investment in the intervening time to

preserve capability. on top of that, in some of the key disciplines' across the defense industry, more than 50% of the industry's current engineering population is either retirement-eligible or soon will be eligible. a fairly rapid decline in capability is conceivable if there are not investments made to preserve those capabilities. to continue with the aircraft design example for just a minute, if aircraft design is seen to be important to our future, and i certainly think it is, the customer should decide and work with industry to invest in a few reasonably advanced designs that would enable us to move out quickly should we reached the point where a new advantage is required in the aerospace arena. they do not have to be manned aircraft.

up front, it would be foolish to say what they have to be. we should stretch for innovation. a second option i think we should be taking to mitigate the risks involves reshaping export control. i know there has been a fair amount of discussion around export control. i thought i would offer an industrial base and perspective. much of our capability can be not only maintained but extended by lifting the export shackles off of american defense companies. certainly, to rely on technological superiority as a strategy, we have to maintain those things that truly make a superior, but with regard to export control, and we have for years made perfect the enemy of the dead. in many cases, i believe we have actually done -- made perfect

the enemy of the blood. good. in many cases, i believe we have actually done irreversible damage. back in the 1980's and 1990's, we were so concerned about others gaining the force multiplier of satellite communications, the we essentially made it impossible for u.s. companies to sell satellites even to our allies. we thought we had a corner on that technology. we thought that if we held that to ourselves, we would be the only beneficiaries of the capability. in hindsight, we were badly mistaken. the very policies the were intended to keep this technology secure for us actually encouraged others who could not buy it from us to develop their on. in fact, they even went out and marketed their products in the

world. america lost valuable export opportunities, and we are no safer as a result. the rules are ill-defined and not cohesive. it is a challenge to navigate through the export process. another example on the airplane side of things, last year we were denied the ability to export upgrades to f-16 radars that would have actually provided less capability than those on the f-35. the f-35 radars were approved for numerous coalition partners and several years ago, but the f-16 radars were denied. we are still struggling to sell unmanned aircraft, even to our allies. the thinking seems to be that our allies would neither build their own nor buy them from those who would be motivated by the diversity of our policy is to build them for hours up --

for themselves. we need to stand back and think hard about our policies with regard to exports. secretary gates is promoting a policy of building higher walls around fewer things. this policy makes a lot of sense. did better support our allies and codifies the technology sharing that occurs every day in and the battlefield and in the joint training that we share with our allies. but i think his reform initiative should also be supported for reasons of maintaining the industrial base. by broadening the international market for our high tech product, the reforms will translate directly into the preservation and the expansion of our nation's critically important high-tech force. by strengthening the defense industrial base, the secretaries reforms will keep us safer for the long term. as i said earlier, the policy

decisions taken in the near term clearly have substantial consequences for the future health of this precious national resource known as the defense industrial base. i am optimistic that these decisions will swing in the right direction, a direction that will revitalize innovation and safeguard the work force upon which our nation's on security depends. i am also optimistic because our government customer has already committed to one of these two things. they are already pursuing the policies. our export i see the energy, focus and determination to get us there. the other critical task that i described, the finding of key capabilities, is a natural process for government to take on, certainly when there is clarity around policy objectives. of course, these are not the

only actions required, but i think they are two very actionable approaches to push us in the right direction. the other reason i am optimistic is because the alternative is so clearly at odds with the nation's interests. without an aggressive push to manage the industrial base as a strategic asset, we could potentially experience outcomes is similar to what we saw in the 1990's. during that time, i am sure you all remember, many of us lived through the process, there were massive waves of talent departures. there was consolidation of companies driven more by a focus on cost synergy instead of innovation synergy. of course, there was a loss of competition and innovation as a result. been an extreme reluctance to channel capital

for the defense industry. i do not believe that is in that nation's interest. a very pro-active approach has been adopted by the dod and acquisitions team to engage the industrial base that has really reinforced my perspective that there is a solid platform year because the channels of communication are open. i am optimistic that we will proactively choose the better direction, one that will provide our servicemen and women with the tools and capabilities that they need to keep us secure in a world that continues to grow ever more dangerous. with that, i look forward to your questions. thank you. [applause] >> ladies and gentlemen, most of you are familiar with our

procedure for questions. if you raise your hand, i will recognize you. if i do not, a way that a whole lot. the lights are bright, so one might not see you. wait for the microphone to be brought to you. tell us your affiliation and then ask your question. dubai have anyone with a question here? -- do i have anyone with the question here? let's bring a microphone forward. >> i am from bloomberg news. you talked about the need to investing capabilities that are required for innovation in the industry.

there are a couple of commissions looking at how to reduce the u.s. deficit. there seems to be a growing demand that both defense spending and entitlement programs beep's reduced. -- be reduced. how would you make the case or stopping further cuts? >> the perspective is going to be thoughtful about any approach that is taken relative to managing the overall budget pressures. it would be easy to simply say, all right, we have had a substantial investment in defense for over a decade. why don't we simply just stick with what we have, stop all new programs, and build up some of the programs that we have invested to create? you might say that is a logical

conclusion if you are primarily focused on coming forward with answers to take on the budget pressures. the argument that i think needs to be made very thoughtfully is that yes, that might save us some next year or the year after, or maybe for the next three years, some expense, but what does it mean for the long- term security of the nation,, and for the cost when the time comes, and it always has come, when we need the things that we allowed it to atrophied? i think it is a better investment to maintain the capability and hope that in the future -- and to hope that in the future you can -- than to hope that in the future you can build it up again.

>> rose three seat 6. >> i am with the science technology policy institute. you mentioned what happens in the defense sector specifically. and yet, that is a manufacturing sector, by and large. we need real things, real products. what we are seeing in the domestic manufacturing for commercial and civil, is that the role of the united states in terms of domestic manufacturing has withered and gone down and down. do you think that the defense industrial base concerns that you talked about me to be linked to our ability to make things commercially in industrial areas of the united states? >> absolutely. much of the discussion that we engage in as a defense

industrial base, and i am not just talking about northrop grumman, but the full number of companies in our industry, relates very directly to that challenge. we are a manufacturing industry and a research and development industry. at our core we are a manufacturing industry. we typically rely on other manufacturing industries, both domestically and in our allied nations. being deeply connected to the outcome for those manufacturers is a national security perspective. manufacturing naturally migrates to the lowest cost of labor locations. perhaps that is part of their reason that we have been suffering a decline in manufacturing in our country. i would offer a little bit of a counter view to that. it tends to go to the lowest cost of manufacturing location and the total cost is not only

the labor cost, but also the infrastructure costs, all of the costs that go with operating in a particular governmental environment, and whether or not you can actually get things done that need to be done at manufacturing facilities. i would say that we do have a great opportunity in the u.s., through the application of technology, to be very, very cost-competitive when it comes to manufacturing, but we need the government regulations and the broader environment to be supportive of those outcomes. there are many places in the country where it is just downright impossible to get any new manufacturing, and it is not because of the cost of labor. there is a broader set of issues that has to be addressed from a manufacturing perspective.

>> we have a question from the back. >> this industry has gone through one enormous change in the past century, and that began in the mid-1980s with the reagan cutbacks and then when the russians decided to leave the game. that caused a major restructuring in the way this industry works. if you look a ribbon next 10 years, do you see s -- if you look over the next 10 years, do you see a similar restructuring taking place? >> if we are able to approach it from a thoughtful perspective, we are in a situation today where many of the core capabilities, there are one, two, or three manufacturers left. a lot of that as a result of the consolidation you described.

but we are all competition advocate. there is a belief that competition in our industry actually creates better outcomes, so further consolidation for most of the capabilities based probably does not make a lot of sense. now, there are other types of consolidations that can occur for innervation synergies -- for innovation synergies that can make some sense. i think we will see some of that, that not only small companies, but even mid-tier companies will think it through their portfolio and decide where they can get the most innovation synergy to bring forth as the nation's defense needs continued to evolve. i do not forecast that we will go through another always where the consolidation of capabilities reduces, in a

substantial way, the competitive capabilities or the competitive landscape. >> in the standing-room-only section. >> my colleague and i were in australia this august. there was a major story in an australian magazine with a large picture of a plane taking off from a big carrier. the headline was, "as the u.s. waynes, china gains." the tectonic plates are shifting in the pacific. australia's defense, which has relied on the u.s., is now in jeopardy. it put in context the broader context of the industrial base.

could you comment on that? >> is clear that australia in particular has been concerned about its ability to rely on u.s. presence and u.s. capability to defend against what it sees to be as a growing number of issues in its region. it is hard to fault that perspective. i would say, though, that that should serve as an additional wake-up call for us. we should not just seem to project military superiority, but actually project category when it is called upon. that is something we need to -- project that authority when it is called upon. that is something we need to reflect upon. fortunately, australia is a very good ally, and the discussions i have been privy to with the australians have been very focused on how we take this on

together. >> i believe we have a couple here on the front row. >> we will start in the middle here. >> i am wondering whether you could answer whether northrop' grumman would entertain a foreign buyer. >> just to provide a little framework, we have announced back in july that we are evaluating alternatives. we said publicly that we are assessing both the possibility of selling the business or the possibility of splitting the business. last friday, we filed the

paperwork that is required to preserve the option for spending it out. we are in the process of evaluating both of those alternatives. one of the things we have held to firmly as the company through the years is that we do not talk about it as we go through the process. so, i apologize for not being able to be directed at your question, but the one thing i would say is that it is very important to us, should we elected to separate the shipbuilding business, that whether it is in the hands of a buyer or a publicly traded company, that it is a destination that is acceptable to our customers and that enables it to perform its role very successfully in the future. >> two things, if i may.

how concerned are you about your company's challenges in complying with value management? also, you mention the potential waning of the need or reliance on carriers as smart weapons are increasingly focused on. could you focus on that? >> let me take them in reverse order. our formed 10 has a section called risk factors. with any filing with the securities and exchange commission, we must eliminate any potential risks we see associated with any of the businesses. we are very thoughtful in going through all of the potential things that we can see on the horizon. none of those are necessarily a prediction of an outcome. there's simply information for

investors to consider, should they want to think of the totality of our business. with respect to earned value management, that is an area where all of the companies in the industry are going through a fairly rigorous process, together with our government customers, to make sure that, comprehensively across the company, all of the system's really measure up to the standards that the department has established. i think just about all of our systems are doing very well overall, but we all tend to have a few spots where we could do better. i would not represent our situation as indicating an unusual concern or risk. we just want to make sure that we are demonstrating excellence across the board. >> one more on the side here.

>> i wonder if you could say something about international integration in your industry, specifically and northrop grumman. the defense industry is different from much of the manufacturing industry, yet i think globalization has happened to you too. where does this fit in the way you see the company's future? >> clearly, operating on an international scale, not only in terms of our sales but our supply chain, is an integral approach to being a defense company in the united states today. some companies may claim that they are not the way, that they do not source to foreign suppliers, but we all do. you cannot operate today without having a global supply change. i would also say that you really cannot bring the best answers to

the customers if you are not connected on an international basis to potential partners around the globe. by that, i mean our allies of course. it is an international business with an international framework. it is complicated by the sometimes confusing maze of regulations that i discussed earlier. part of the benefits that i think we could achieve by some improvements in the export regime would be to actually facilitate some of that commerce, if you will, between partners across the allied bridges here. but this is an international business, and it has to be thought of, managed, and planned for the future from that perspective. >> i think i saw one more year on the right. -- one more here on the right. >> i wanted to ask you about

kcx and your company's decision to not compete. do you still think it is not going to be a fair competition? do you have any regrets? >> we do not have any regrets. [laughter] >> we have one more in the middle, and then i will take the moderator's prerogative to ask the last question. >> you talked about the government meeting to sponsor innovation, but at the same time, part of the defense reforms that secretary gates is pushing is doing away with -- reducing costs where innovation is required.

can you do government sponsored innovation under a fixed price? >> one of the things i said in my prepared remarks was that we have appreciated the approached the the dod has employed through this process of looking at the set of initiatives that we are taking on today. there has been a lot of dialogue with industry leadership, with industry associations, and one of the things the has been right at the table throughout the dialogue has spent this issue of around the appropriate use of cost plus reverses a fixed price -- cost plus verses fixed price. if you listen carefully to the public commentary, there has been a focus on the appropriate

use of contract in. i would agree with much of the perspective that sometimes in the past cost plus has been inappropriately used for things that should have been at fixed price incentives. i think in general across industry, you will find a lot of support for production activities. so the question goes to, what are really the appropriate uses for cost plus and fixed price when you are not in production? that is where the implementation of the policy statements is going to be. to the extent the we are talking about simply integrating already developed technologies, then i think there is an opportunity for fixed price incentives.

where we are talking about the utilization of technologies that are not at a high level of readiness, then i think it is a mistake to try to go down the path of using fixed price. i think there is going to be a lot of engagement between industry and the implementation level within the department of around what was really meant by the terms that are being used to describe the appropriate use of cost plus contracting. there will be a lot of negotiation around that. >> let me take the opportunity to ask a final question. we have been in the throes of acquisition reform for my entire career in washington. for most of you in this room as well. the one issue on which we all agreed is that the government itself needs to be able to reconstitute and allocate the

capability of the workforce. what is the industry's role in fostering the government's capability? >> i think there is a big role for industry. we cannot be our recruiting on behalf of the government. that needs to be done from the government perspective. there have done a lot of ideas put forth on ways we can help. i have seen that change. i have seen the implications of that change. we did lose an incredible amount of capability on the government's side as well as the industry side during the 1990's. reconstituting that is critical. some of the things that industry can do in that regard, some examples that have been put forward, i recall that in the 1980's, there were a number of people coming up through the acquisitions ranks of a government agencies that would actually take a tour through

industry. they would be assigned to programs in industry. from my perspective, there is no replacing the things you learn by doing hands-on activities, whether it is being the program manager at a project level, whether it is being imbedded in an engineering team, or whether it is sitting side by side with an experienced contractor in officer and going through the contract process. i would say that not only northrop grumman, but other companies in our industry, have been very clear with the department that we are eager to be engaged in this because it benefits everyone. it improved the overall strength of the numbers of experienced based in the acquisition corps. >> thank you. i want to thank all of you for your attention today. thank you to mr. bush for your

candor and remarks. with that, we will adjourn. thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> starting shortly, we will bring you today's white house briefing. robert gibbs will answer

reporters' questions. we will have that life for you when it gets under way. until then, your phone calls from today's "washington journal." colorado, a slew of negative ads. if you look at who is spending money as far as the interest groups, the groups are a who's who of big money in the campaign this year. american crossroads, 65 million group, funded by the support a political adviser karl rove was the first to go in and air act of the primary. a few nights later, other conservative and business groups dropped it six-figure sums, including anti-tax group club for growth, chamber of commerce and the senate conservative fund run by senator john demand. it has favored joe buck, the

republican candidate, but the democratic party picked up some of the difference on behalf of michael bennett. at union backed citizens for strength and security and campaign money watch, a nonprofit to promote public funding for elections. also "the new york times" has a story about sharron angle of nevada, tea party candidate running against harry reid. her exit in the war chest evaporates. it says -- it says here that spending to about a third of the war chest she amassed --

the story goes on to say that besides her on a blistering spending pace, she has been backed by independent groups who have spent more than $4.3 million on her behalf since july. in contrast, outside groups during that same time spend only about $2 million in support of mr. harry reid's effort. what do you think the role is in politics? what role does it play in a

campaign 2010? santiago on the democratic line. you are the first phone call. you ever taking my call. host: what your thoughts? caller: i have been watching all the races and i would like to thank c-span for all of the information you provided the voters. it is very easy to see that the candidates in these races, if it wasn't for money, they wouldn't even be on the ballot, especially the republicans. and i think the money that is pouring into these republican candidates pockets is actually -- reducing our democracy. host: what about democratic candidates? they are benefiting from outside groups as well. david brooks writes in his column today that the service employees international union is spending about $40 million for democrats.

caller: i agree that democrats also are receiving money but we already know republicans are receiving a lot more money, from especially the karl rove group and the united states citizens united thing. let me finish. the unions have to disclose everything they do. these other groups do not. we already know that. we cannot prove there is no foreign money. we do understand -- we are not stupid people out here in our area. we know they are doing this because they want to outsource the jobs to foreign countries. host: what do you think the impact is of republicans, as you say, republicans receiving more money? what do you think the impact of all of this money is? caller: i think the impact is

going to show us that this is really about the haves and the have nots. if you don't have anything in this country and you are depending on a politician to help you, then you need the money. the money will give you access and it will help you, as sharron angle has shown, $40 million raised in one quarter, she already spent 12 million of it already? she would not even be able to do that and compete if it were not for the outside money coming into nevada to help her. host: have you ever contributed to a campaign? caller: yes, i have. i contributed to the democratic campaign but i only contributed to hundred dollars. and after you paid $200, everybody knows i contributed. i don't know who is contributing to these outside groups.

some in the media will not follow up. host: one final question. what did you expect in return for your money? caller: in return for my money? i expected health care because if my understanding was correct, the people in this country when it health care reform. i thought the people in this country one of financial reform. i thought the people wanted equal pay, though lillie ledbetter act. host: that was held up -- hilda. brian. go ahead, bryan. caller: i think it is kind of odd, in the 2008 election, barack obama out raised john mccain huge. he chose not to do public financing. he got tons of money from special interests. and all of a sudden now, because of the court ruling which i and understand it does not bring more money into the picture, it just takes some of the red tape

-- before they had to go through a charitable -- charitable organizations. what is funny, if i heard you right, that senator reid has just about as much money as sharron angle? host: going into the final stretch. caller: the media, if anything, is biased toward the democrats again because everybody believes that the republicans have way more money. they are just getting as much -- it is a fair fight now. i really think it is hypocritical that now we are talking about it, when in the 2008 election, did barack obama outspend john mccain in any swing state at least 2 to 1. host: david brooks writes in his piece --