National Shipbuilding Strategy

(Limited Text - Ministerial Extracts only)

Thursday 11th July 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Defence (Stuart Andrew)]

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate the right hon. Member for North Durham (Mr Jones) on securing the debate, and I thank all right hon. and hon. Members for their contributions. I echo the comments made by the hon. Member for Merthyr Tydfil and Rhymney (Gerald Jones) about the tone of the debate, which has been somewhat less fraught than some shipbuilding questions and debates that I have been involved with in my time in this role.

As the Minister for Defence Procurement, I am acutely aware that I have responsibility for ensuring that we procure the best capability for our armed forces, but also for keeping an eye on value for money because we have a huge responsibility to the taxpayer, as well as for making sure we protect our nation’s interests, both here and abroad. I understand and appreciate that there is also a responsibility to ensure that our defence spending encourages and promotes prosperity throughout the United Kingdom, not just in the main industries but, crucially, throughout our vast supply chain.

I am pleased to speak in the debate, and I am grateful for the insights that others have contributed. The need for us to project our influence globally, while promoting UK exports and prosperity, was at the heart of the 2017 national shipbuilding strategy. Since its publication, work has been going on to deliver the vision of a productive and innovative UK shipbuilding industry, and that is at the heart of this subject.

I thank the right hon. Member for North Durham and the other members of the APPG on shipbuilding and ship repair. I appreciate the meeting we had, which was of great value. There was some serious food for thought in the document that he and his colleagues presented, and I will talk a little more about that later.

The strategy sets out the Government’s procurement approaches for Royal Navy warships and other naval vessels. The strategy builds on our strengths, but also identifies where more must be done collectively, in both Government and industry, to address the structural challenges the sector faces in terms of access to innovation, maximising productivity, skills—a number of people mentioned those—and winning global business. Our ambition is for our shipyards, and the vast network that underpins them, to be catalysts for their local economies, driving growth and creating the highly skilled and well-paid jobs we all want to see.

[Douglas Chapman]

I hear everything the Minister is saying, but there are shipyards in the UK that will be hanging by a thread in terms of skills and future investment in infrastructure unless quick decisions are brought to the House and made by the Government. We cannot go on like this, going from feast to famine. One of the points of the national shipbuilding strategy was to get a steady drumbeat across all these sectors. I would like to hear what he has to say about that.

[Stuart Andrew]

If the hon. Gentleman will forgive me, I will come on to that point a little later, because I accept that it is an important element of where we need to get to to try to support our shipbuilding industries.

I was glad that the APPG’s report recognised the contribution from the UK’s shipbuilding and ship repair industry to the UK economy of over £2 billion; we should be mindful of that. I am fully cognisant of the need to obtain the right capability for our Royal Navy, at the same time as trying to ensure that we get good value for our taxpayers. That is why we are helping the industry to grow, compete and successfully win bids in the global market, as well as just in the UK market. That is part of our objective, and we will be looking at that more widely when we consider our approaches to a potential defence industrial strategy.

In my time in post, there has been a huge amount of focus on the fleet solid support ships, which I understand, but in terms of a successful UK shipbuilding industry, we should be looking much more widely, and the right hon. Member for North Durham made that point powerfully. All of our vision is for a shipbuilding sector that does not need a contract for a couple of non-complex warships; it could also work in the civil sector.[Official Report, 17 July 2019, Vol. 663, c. 10MC.] It is a globally competitive sector that is looking at how it can export high-value designs, systems, sub-systems, and integration work, so it can win commercial and defence contracts on its own merits.

[Mr Kevan Jones]

I understand the point that the Minister is making, but it is important that investment in Ministry of Defence contracts for ships in this country has a spin-off into the civilian sector, in terms not just of producing complete ships, but supporting marine engineering, architects and everything else. If we are to keep that leading edge, which feeds into civilian work both in this country and abroad, including in ship repair and refurbishment, that steady drumbeat of work and investment is needed.

[Stuart Andrew]

I said that I would come on to those issues a little later, and I promise I will—I will not hide from them.

The strategy is important for the Ministry of Defence, but I am keen that we look at this across Government too. For that reason, I have asked to meet the Minister for Business and Industry and the relevant Parliamentary Under-Secretary of State at the Department for Transport so that we can discuss how best to support UK shipyards, from the perspective of not only defence, but the opportunities that may exist for the commercial maritime sector and whether it is ready and prepared for them. I want this to be a cross-Government approach to securing the future of the industry.

The strategy sets out an ambitious plan to put the UK at the forefront of the technologies of the future. That is why investment in science, technology, and innovation is key, as they have the potential to drive improvements in productivity, to grow prosperity in the UK and to build an internationally competitive industry that is resilient to the peaks and troughs of both military and civil shipbuilding.

We have heard today about the success of the BAE Systems approach when it comes to the Australian and Canadian work; the company has also been successful in terms of the Royal Thai Navy’s offshore patrol vessel requirements. My right hon. Friend the Secretary of State has had conversations with both the previous and the current Secretary of Defence in the United States about whether the Type 26 and Type 31 might be appropriate and suitable for their requirements. That is something that she will continue to pursue, as will we all.

Of course, there are all sorts of other investments happening, such as the Royal Navy’s new autonomy and lethality accelerator. This £45 million programme will deliver rapid and ongoing transformational change across the maritime environment. The Royal Navy is also forging ahead with things such as the 3D printers that the right hon. Member for North Durham sent me a question about recently. There is a lot of work going on in that innovation area that will continue to support the wider supply chain to our industry.

A few hon. Members have mentioned the Type 31e programme, so I will give an update. It is, of course, a pathfinder for the delivery of the new shipbuilding and capability vision set out in the strategy. We announced the award of contracts for the competitive design phase in December. I am pleased to say that the competition is still on track, and it is our intention to announce the outcome of the competition for the design and build of the ships by the end of the year. It has been a vibrant and healthy competition.

I take the point that the hon. Member for Merthyr Tydfil and Rhymney (Gerald Jones) made regarding the value. I have been checking throughout the price we have, which is £250 million per ship. We made some initial adjustments to make it tie in with the way we have procured other warships in the past, so we have taken costs such as Government-furnished equipment out of that £250 million. The Royal Navy assures me—both I and the Secretary of State have been quite robust with it—that the capability we will receive will meet its requirements; it has given us that absolute reassurance, and it is looking forward to receiving the ships.

I will go over some of the other points that have been made. In opening the debate, the right hon. Member for North Durham rightly talked about the skills agenda—I will come on in a minute to the points about the supply chain. He is absolutely right that we must ensure that we learn the lessons from the submarine programme. It has been blindingly obvious to me, as I have been learning this job, that ensuring that Barrow is right up there again and capable of delivering our submarine programme has been a major challenge.

Coming on to the drumbeat, it is our intention to ensure that the industry has that 30-year plan of what the Royal Navy’s requirements will be, so that it can see where the opportunities will arise and where there may be potential gaps that it may need to fill. That said, we have of course provided 20 years’ worth of work on the Clyde. I will comment in a minute on what my right hon. Friend the Secretary of State is doing in this area, because it will be incredibly important.

[Steve McCabe in the Chair]

I have heard a number of people say that the FSS are warships, and that no other country in Europe buys its support ships or other ships from international orders. That is not quite true: for example, Germany had an international competition for its multi-purpose frigate, Norway has procured a support ship from South Korea and five frigates from Spain, Australia has had two support ships from Spain, and New Zealand has an auxiliary ship from South Korea. It is not true to say that all those countries always have their ships built in their home countries.

[Dr Julian Lewis]

What the Minister says is completely correct. The question is not so much whether countries choose to do this but whether they have to. In the case of Germany, its expenditure on defence is notoriously a much smaller proportion of its GDP than ours is of ours, so it is probably doing it for the same sort of reasons. That does not make it the right policy.

[Stuart Andrew]

I will come on to my right hon. Friend’s comments. He talks about funding, which is absolutely the heart of the issue. With a very challenging budget, we must ensure that we get the maximum capability possible for our armed forces at the best value. I must say that in the past, international competition has proved very successful; on the MARS tankers, it saved a considerable amount of money. We want to go for two of the ships on the FSS with the option of a third.

[Dr Lewis]

rose—

[Mr Kevan Jones]

rose—

[Stuart Andrew]

I will give way to my right hon. Friend, but there will be a fixed budget, and we must get the best we can out of that money.

[Dr Lewis]

I fully understand the logic of the Minister’s position, but it just goes to what I was trying to convey in my speech: it is a question of short-term savings that will show up in an annual budget, compared with medium to long-term costs when the time comes that we want to build other ships and we find that we have lost our industrial footprint to some extent and have to reconstruct it. I acknowledge that that is the dilemma that he faces.

--- Later in debate ---

[Stuart Andrew]

I am grateful for the point that my right hon. Friend makes. That is the balance we are struggling with at the moment; I will be completely up front about that. It will probably be helpful if I go on to talk about what my right hon. Friend the Secretary of State has said. In the speech that she gave to the Royal United Services Institute, she was quite right to say that we needed to look at where we could explore changing policy so that the UK could at least have the choice, if it so wished, to just build in the United Kingdom.

A tremendous amount of work is going in to reviewing the national shipbuilding strategy. We have Sir John Parker’s comments and of course we are taking stock of those. My right hon. Friend asked for a review to learn the lessons from the MARS tankers, so that we can feed them into potentially changing the policy, but I assure hon. Members that all that, and all the debates, meetings and questions I have had, is followed through.

[Dr Lewis]

Will the Minister give way?

[Stuart Andrew]

I had better give way to the right hon. Member for North Durham first, and then I will come back to my right hon. Friend.

[Mr Kevan Jones]

On the MARS tankers, when the Minister is asking for the costings, could he ensure that the costs of the assessment phase, which I think were nearly £100 million, are included? I am also led to believe by industry that some of the costs were incurred because of the poor workmanship and other issues that surrounded it, so what was seen, on ticket price, to be very competitive was overall quite expensive.

[Stuart Andrew]

I assure the right hon. Gentleman that the report we commissioned will look at every single aspect of that, including the benefit to the supply chain in the United Kingdom. There is some evidence that a number of UK supply chain companies have seen their international work increase as a result of being part of that. We are formulating our response to the review of the strategy.

[Dr Lewis]

The Minister is being amazingly kind. I really appreciate it. Let me put this sunny scenario before him. Let us imagine that the wishes of the Defence Committee come true and the defence budget is restored to 3% of GDP, as it was right up until the middle of the 1990s, quite a few years after the end of the cold war. Will he at least acknowledge that if there were an uplift in the defence budget, spending some of that extra money on securing the shipyards and the defence-industrial footprint, even if that sometimes meant that we spent more than we might spend in the short term if we contracted with an overseas builder, would be a sensible strategic decision?

[Stuart Andrew]

Again, that is part of the work that the Secretary of State is looking at, so that the United Kingdom can make a choice on those options. Of course, that will require more money. We have to accept that. I look forward to right hon. and hon. Members securing similar debates, so that Treasury Ministers can answer those questions.

[Dr Lewis]

They never do. They always try to put it back to you.

--- Later in debate ---

[Stuart Andrew]

The next time it comes to me, I will push it back, so that hon. Members can challenge that. We can make strategic decisions, but we are governed by the rules of the Treasury Green Book, which we obviously have to follow. The debate on that is a wider debate that we need to have.

I want to put to bed some questions on the FSS. Frankly, we are at a point in the competition at which to delay it and start again would not be helpful for our plans for the carrier groups, so I cannot say to right hon. and hon. Members that that competition will change. It is still an international competition and will continue to be. That said, we still have a UK consortium in there, which should we welcomed. I sincerely hope that that consortium submits a competitive bid that not only features the skills we have been discussing, which are highly valued around the world and have certainly provided success in areas such as Australia and Canada, but help it to become more internationally competitive. Again, that is part of the strategy. We hope that it may well win some more of that work.

There were a couple of comments about the frigate factory. I feel like I am repeating myself somewhat, but BAE Systems took this decision that, for commercial reasons, the value for money was not there; the MOD agreed, but it was a commercial decision. The hon. Member for Glasgow South West (Chris Stephens) talked about the exportability of the Type 26 and the Type 31, and how the Canadian and Australian examples should mean that we should forget about the Type 31 and concentrate on the Type 26. However, the vessels are for different markets, which again is part of the offer that our shipyards might be able to promote to other parts of the world. The Type 31 follows a modular approach, as my right hon. Friend the Member for New Forest East (Dr Lewis) rightly says, so it can be adapted to suit varying countries’ needs for whatever work they want the ship to do. We hope that the prosperity brought to the UK through exports of the Type 31 will be quite considerable.

[Chris Stephens]

The Minister is being very generous. Are he and the Ministry of Defence open to discussions on frigate factories and future shipyard investment with, for example, BAE Systems and other private sector organisations, to look at how we can improve shipyard construction?

[Stuart Andrew]

Yes, absolutely. Sir John Parker was commissioned to undertake a review, and he spoke to businesses, industry and all the stakeholders. He has written his recommendations, which we are considering. I have had extensive conversations and meetings with trade unions, industry and trade associations, and I assure right hon. and hon. Members that I have taken all their points on board. We are in the middle of assessing all that information, so it is quite difficult for me to say anything concrete at this point.

I assure the hon. Gentleman and other Members—I know that I speak on behalf of the Secretary of State—that, as long as I am in this role, which may only be for another 14 days or so, we will continue to ensure that all the points that have been made will be seriously considered. We will review and challenge, and we will make sure that all that helps us to formulate the Ministry of Defence’s response to that review, so that we can do what I actually believe we are all trying to achieve: to make our shipbuilding industry successful here in the UK and abroad, so that the skills and jobs that so many people have come to rely on, including our country and our armed forces, can be relied on for years to come.