Lord Hoyle
To ask Her Majesty’s Government what steps they are taking to ensure the use of more British steel in defence contracts.
The Minister of State, Ministry of Defence (Earl Howe) (Con)
My Lords, the Government are committed to supporting the British steel industry and we have policy guidance in place to address any barriers that prevent UK steel producers competing effectively in the open market. We remain engaged with our prime contractors to ensure their support in implementing this. The Government also publish their future pipeline for steel requirements on GOV.UK, which enables UK steel manufacturers to better plan and bid for government contracts.
Lord Hoyle (Lab)
I put it to the Minister that using more British steel would overcome the uncertainty in relation to Brexit. It would bring more prosperity to steel-producing areas and more job security for British steelworkers. Using only 40% British steel on defence projects is far too low. Surely we should be using 100% British steel in all our defence programmes.
Earl Howe
My Lords, looking at recent warship procurement programmes, it is generally true to say that steel has been sourced from abroad in cases where UK steel suppliers have not been able to produce steel to the required grade. If one sets that issue aside, UK producers have generally proved to be very competitive, as demonstrated by the Queen Elizabeth aircraft carrier programme, for which 88% of the structural steel was sourced from UK mills.
Lord Trefgarne (Con)
My Lords, does my noble friend anticipate any difference to the defence procurement rules following Brexit?
Earl Howe
My Lords, at the moment, as my noble friend will know, it is a matter of law that all ships not classified as warships are procured through international competition. After we leave the EU, it will be open to us to decide whether to continue with that practice as a matter of policy, but we will be guided in our thinking by the need to strike the best balance between value for money and protecting national security.
Lord Brookman (Lab)
My Lords, steelworkers throughout the country will be pleased that my noble friend Lord Hoyle has tabled this Question. It has been a long time coming round, but it will do so again and again. My noble friend and I have a great deal of respect for the trade union leadership in the steel industry, which covers all the various unions involved. They continually face capacity and manpower issues, a point touched on by my noble friend a moment ago. As a past general secretary of the Iron and Steel Trades Confederation—only five foot five inches tall and I got the job of general secretary of a steelworkers’ union; just imagine that happening today—I know the problems and issues the officials face. They have been facing them for many years because this is not a new situation.
Lord Brookman
I am coming to it. He said, “Keith, that was all right, but you must realise that we live in a post-industrial society”. If that is the case, we have a dim future in front of us.
Earl Howe
The noble Lord is absolutely right to point out that the UK steel industry has faced major challenges over the past three to four years, in particular from international competition and high infrastructure costs. Those challenges continue. But steel is one of this country’s foundation industries, which is why we have supported the sector in a variety of ways. As it is an energy-intensive industry, we have made provision to support any additional costs incurred by carbon-reduction policies; we have the industrial strategy challenge fund; we are reviewing business rates; and we were instrumental in securing antidumping measures through the EU. Also, wherever possible, across government we attempt to buy British when it comes to steel.
Lord Sterling of Plaistow (Con)
My Lords, in 2014 I commissioned a special document from the London colleges in connection with the value of defence procurement being sovereign and not overseas. The suggestion I read on Monday—that these three ships will be designated supply ships and therefore should be open to competition—is to my mind complete nonsense. In practice, they are supply ships going into action and have to be armed. Four of the countries of Europe, including France, are building very similar ships, which are designated as warships. It is absolutely ridiculous to consider otherwise. Also, it supports the view on steel, because some 100,000 tonnes of steel is involved. Further to that, it leads to jobs and, on the education side, continues the drumbeat that we need to build up the manufacturing companies. Will the Government re-examine this issue? This is another example of the Treasury being in love with cost and not value for money.
Earl Howe
My Lords, I am afraid I cannot entirely agree with my noble friend. It is undoubtedly true that the Armed Forces benefit from the UK acquiring military capability from an open market. Competitive procurement ensures that we drive innovation and efficiency into our industrial base. UK suppliers’ drive to be competitive in their home market will ultimately secure their prosperity, not only in the UK context but in the global marketplace as well.
Baroness Smith of Newnham (LD)
My Lords, in the light of the Financial Times report that the company British Steel is pleading for carbon credit loans to tide it over Brexit, will the Minister explain what efforts are being put into defence procurement contracts to ensure that steel is being decarbonised as far as possible?
Earl Howe
My Lords, the industrial strategy challenge fund, which I mentioned earlier, is there to help industry drive innovation in its manufacturing processes. As I also mentioned, we have supported the industry with the costs associated with carbon reduction, which can in some cases be substantial. In those two ways in particular, we are doing our best to recognise the challenges that industry faces.