Defence Procurement and Supply Chains
(4 years ago)
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Mick Whitley (Birkenhead) (Lab)
I beg to move,
That this House has considered defence procurement and supply chains.
It is a great pleasure to serve under your chairmanship, Sir Charles. I am most grateful to hon. Members for participating in this important debate. I especially want to thank the Minister for Defence Procurement for being here today. I look forward to working closely with him on this issue in future and would welcome the opportunity to meet him to discuss the matter further.
The question before the House is broad and multifaceted, with profound implications not only for the UK’s national security, but for the domestic industry and the many left-behind towns that are home to Ministry of Defence suppliers. I hope that, in the short time available to us, we will have a suitable and wide-ranging discussion.
I warmly welcome the breadth of experience that hon. Members bring to today’s proceedings, whether they have served in our armed forces or come, as I do, from a trade union background or have experience in Government.
Today’s debate could not be more timely. It takes place amid an economic crisis unlike any in recent memory. Across the country, joblessness continues to soar and unemployment might hit more than 3 million by spring 2021. British industry has been especially hit badly by covid-19 and the resulting lockdown. Already we see a haemorrhaging of jobs across the sector, with left-behind towns in the north and midlands bearing the brunt.
Thousands of workers at companies such as Bentley, Airbus and Safran Nacelles now find their jobs under threat. The scale of the crisis has been starkly illustrated by the situation of Rolls-Royce, Barnoldswick, where operations have been offshored and striking workers locked out of the plant just before Christmas.
The job losses are not confined to plant manufacturing sites. Wider supply chains have been devastated as well, with 5,000 lost in aerospace alone. As the Institute for Public Policy Research has demonstrated, redundancies in this sector have a disproportionate impact on local economies, compounding the already high levels of deprivation and joblessness found in towns such as Birkenhead.
Meanwhile, the UK is struggling to adapt to a fast-changing and volatile global situation. Our departure from the European Union risks leaving us more isolated on the world stage, while the threat posed by non-state actors and cyber-terrorism continues to grow. My argument is simple: defence procurement has a vital role to play in helping British industry to survive the current crisis. The demand for British manufacturing has slumped, but the need for high-tech cutting-edge defence projects remains as pressing as ever, and British suppliers are well placed to meet the demand.
The Chancellor stated in the spending review that there would be additional funding of more than £24 billion in cash terms for defence in the next four years, including more than £6 billion for research and development. The Government say that they are serious about levelling up the UK and building back better. If that is the case, it is imperative that the additional funding goes towards projects that sustain high-skilled employment and provide quality training opportunities to young people across the country.
The argument is not just an economic one; it is also about national security. When the pandemic first struck, it exposed dangerous vulnerabilities in international supply chains. If we are to keep Britain safe in an uncertain world, we must maintain sovereign capabilities and build up our onshore defence industry. We have heard a great deal in recent years about the supposedly draconian restrictions placed on the UK by the European Union, but where our European neighbours rightly exploit the freedom afforded to them on defence procurement, the UK all too regularly buys off the shelf and undermines British industry by opening up defence contracts to international competition. It is not just British manufacturers that lose out, but the British people through the loss of taxes, GDP growth and high-skilled jobs, which are already all too rare in a modern economy. That is why the public overwhelmingly support prioritising British manufacturers for defence projects.
There have been promising developments in recent years. In fact, there is a growing consensus that defence procurement has a vital role to play in supporting domestic industries, and making the UK more secure by improving sovereign capabilities. That was recognised in the 2015 strategic defence and security review, which called for promoting prosperity to be recognised as a core national security objective. It is similarly reflected in the national shipbuilding strategy proposal that defence vessels should only be open to UK competition and the incorporation of a national value framework into the combat air strategy.
There remains much more to be done. My party has called for a new defence industrial strategy that expands the definition of good value to include support for British manufacturers, small to medium-sized enterprises, and the high-skilled jobs that they create. I want to talk about what that would mean for the shipbuilding industry.
British shipbuilding and ship repair is a £2 billion industry that regularly employs 32,000 people in the UK and supports 20,000 jobs in the wider supply chain. Shipbuilding also accounts for 60% of defence spending in the north-west, and of course I have the great privilege of my constituency being home to the historic Cammell Laird shipyard. Despite significant challenges in recent decades, Cammell Laird has continued to provide high-skilled jobs and meaningful training opportunities to 700 people in Birkenhead. It is staying ahead of the curve. Just last month, it launched the RRS Sir David Attenborough, perhaps the most technologically sophisticated vessel produced in this country in the past three decades. As a passionate advocate of vocational training, I am delighted that it continues to provide opportunities for young people in my constituency. More than 300 young people have been offered apprenticeships in the past decade, with 51 starting this year.
Now Cammell Laird stands to benefit from the construction of the new fleet solid support ships for the Royal Fleet Auxiliary. Along with Babcock International, Rolls-Royce and BAE Systems, Cammell Laird is part of a team UK consortium that was shortlisted for the contract before the competition was suspended last November. Those companies represent the very best of British manufacturing and the benefits of building those ships in the UK are obvious. It would create or secure at least 6,500 jobs across the country, including hundreds at Cammell Laird. Of the £800 million spent on the new support vessels, at least £250,000 would be returned to Treasury coffers through income tax, national insurance and lower welfare payments. That is why I welcome the announcement by the Secretary of State for Defence that the vessels will be classified as warships, guaranteeing that they will be built in Britain.
That is in line with the recommendations contained in Sir John Parker’s inquiry into the national shipbuilding strategy, but I am now hearing concerns that the Ministry of Defence could accept bids from consortiums including and even led by foreign companies. I echo the calls of my right hon. Friend the Member for Warley (John Spellar), the vice-chair of the Defence Committee. The Government must provide cast-iron guarantees that the ships will be built in British shipyards. I hope the Minister will be able to provide us with that assurance today.
Building the ships in Britain will not just benefit the hundreds of workers who will be guaranteed gainful employment for another decade or the young people whose horizons will be expanded through the provision of quality apprenticeships; it also means more work for the countless suppliers who provide the shipyards with parts and logistical support. It will mean more money spent in our town’s shops, restaurants and hospitality venues, which have been so devastated by the national lockdown, and it will mean more revenue for our local council, which is working tirelessly to support some of the poorest and most vulnerable people in the country. In short, it will mean hope for the town of Birkenhead.
The fleet solid support ships are not the only defence project that has a role to play in kick-starting the economy. There are many others, perched on the slipway and ready to launch. This includes the new tranche of Typhoon combat aircraft, the Merlin Mk 2 helicopters and the Boxer armoured fighting vehicles, which are all ready to go into production. By placing an order for the new Type 26 frigates now, the Ministry of Defence could get the supply chain for long-lead items running. The Government should also consider bringing in phase 2 of the Tempest project, which has been scheduled for 2022 and 2023. Those are the kind of shovel-ready projects the Prime Minister has spoken about so often.
In short, this is not a plea for little England-style nationalism; it is about providing a practical and effective way of rebuilding British industry so that it can address the needs of people in this country in the face of years of neglect and decline. By ensuring that these projects are built in Britain, the Government have the opportunity to prove that they mean what they say about levelling up and building back better. It is in their gift to provide towns such as Birkenhead, Barnoldswick and Barrow-in-Furness with the jobs and training opportunities they deserve.
Last month, Remembrance Sunday provided us with an opportunity to honour not only those who have served in previous conflicts, but all those who continue to keep Britain safe. It is incumbent on us, in turn, to ensure that they are as safe as they can possibly be, and that means ensuring that they are equipped with state-of-the-art equipment, all built in Britain.
Sir Charles Walker (in the Chair)
I call Simon Fell. I will give Mr Fell four minutes, but that is it.
Simon Fell (Barrow and Furness) (Con)
Thank you, Sir Charles. I will try to be quicker than that. I thank the hon. Member for Birkenhead (Mick Whitley) for securing this important and timely debate. We keep hearing the phrase “levelling up” and the hon. Gentleman mentioned it. The Prime Minister tells us that it is his mission to level up the country, and for communities such as mine in the north that is a welcome prospect. We need to recognise just how important the defence supply chain is to that agenda.
In my constituency, we build the nuclear deterrent, and when I say we, I mean 10,000 of the most skilled, world-leading workers imaginable building submarines with a complexity rivalled perhaps only by what NASA does. That work—the completion of the Astute-class boats and the delivery of the four Dreadnought-class boats—is the beating heart of Barrow and Furness and our local economy.
Not to labour that metaphor, but if the work in the yard is the heart, then the supply chain is the blood that runs through our communities, keeping our businesses alive through Cumbria and beyond. The supply-chain spend alone was £1 billion in 2019 from the submarine programme. That supports 80-plus businesses in Cumbria, but it does far more than that. It trains apprentices and creates skills clusters that attract even more businesses and further investment. Used well—don’t get me wrong, I would far rather see more supply-chain spend in Cumbria—defence procurement can be transformative.
BAE in Barrow has recognised what it needs to do to invest in our communities to do its job well. To produce boats to a steady and reliable drumbeat, it needs to invest in our towns to make sure we can stand on our own two feet and that we are creating the people with the skills to keep fuel in that machine. I applaud it for acting in that way. It backed our local schools and college, it led Barrow’s successful town deal—I especially give credit to Steve Cole from BAE on that—and it is championing a learning quarter in our town, which will bring a university campus into Barrow and address the fundamental problem that towns such as mine have, where there is a brain drain of young people leaving to the bright lights of big cities like Manchester and Liverpool.
In Furness, defence spending is not just about submarines; it is about backing education and skills, backing local businesses and providing resilience for our local economy in these troubled times. I welcome the upcoming defence and security industrial strategy, which I hope will lead to much more of this in communities like mine; frankly, it is very badly needed.
Sir Charles Walker (in the Chair)
I call Christina Rees. You have four minutes.
Christina Rees (Neath) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Sir Charles. I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley) on securing this debate.
Aerospace and defence are inextricably linked, and are a cornerstone of the Welsh economy. Last year in Wales, the sector had a turnover of £6 billion, which is 10% of the UK total, and it employed 23,000 people before covid-19. In Wales, we have Raytheon Technologies’ airborne surveillance aircraft division at Broughton, BAE Systems at Glascoed, General Dynamics at Oakdale and Merthyr, Airbus Defence and Space at Newport, Thales at the National Digital Exploitation Centre in Ebbw Vale and West Wales airport in Aberporth. I welcome today’s news that the Ministry of Defence has announced that BAE has secured a new £2.4 billion next generation munitions solution contract, which will sustain 4,000 jobs in the UK over 15 years, with 550 of those at Glascoed.
The Welsh Government have provided support mechanisms for innovation and manufacturing in the defence sector. I will mention just two. The advanced manufacturing and research institute at MOD Sealand in Flintshire is unique in providing the UK with a defence-led R&D centre of excellence, which will create a technology and innovation cluster aligned to emerging technologies and capabilities, with long-term commercial opportunities.
The second project is Thales’ NDEC, which was opened in Ebbw Vale at the beginning of the year, supported by Welsh Government funding and in partnership with the University of South Wales. It will increase the cyber and digital knowledge base across business, education and academia, and will focus on protecting critical national infrastructure. There are opportunities for Thales in Tempest, as well.
Those two projects are examples of the Welsh Government working with the private sector, in partnership with the MOD. I call on the Minister to maintain and enhance this relationship to develop Britain’s sovereign capability, support economic growth across the UK’s nations and regions, and promote a levelling-up agenda that includes a positive weighting for British-based and Welsh companies for MOD procurement.
Sir Charles Walker (in the Chair)
I call Grahame Morris. You have four minutes, although you do not need to take four minutes if you do not need them.
Grahame Morris (Easington) (Lab)
Thank you, Sir Charles. I thank my good and hon. Friend the Member for Birkenhead (Mick Whitley) for securing this important debate, which is particularly timely given the extra £16 billion of defence funding that was announced in last week’s spending review.
Defence contracts represent an excellent opportunity for the UK economy and for job creation and retention in Britain. It is vital—I am addressing these remarks to the Minister in particular—that defence projects have a domestic focus, with a particular emphasis on maintaining jobs and the skills base in the UK.
Unite members at the Rolls-Royce site in Barnoldswick are currently being forced to take industrial action, because Rolls-Royce is cutting 350 highly-skilled jobs and offshoring them to Singapore. Workers at the plant fear that this latest round of job cuts will spell the end of the site itself, as it will likely become unviable as a result. The Barnoldswick workforce actually helped to set up the Singapore site, having been given promises that it would never put the home site at risk—a gross betrayal of loyal staff.
Unite the union understands that this work will remain at the site in Barnoldswick, at least for now, due to international arms trafficking regulations. However, the latest job cuts at Barnoldswick call into question the very viability of the site, and whether work on the joint strike fighter lift fan blade will transferred to Singapore.
While Singapore may be a safe and secure country at the moment, there are concerns that this technology needs to be protected. On the 80th anniversary of the battle of Britain, the striking workers rightly believe that it is a disgrace that the Barnoldswick site is under threat, given its heritage and the important role that it played in supplying the components for Merlin engines, which kept the Spitfires flying in the battle of Britain.
As part of its long-standing history in supporting British defence, Rolls-Royce has benefited from vast amounts of UK taxpayer money, not only in loans, grants, tax breaks and R&D, but in the form of defence contracts. Rolls-Royce will no doubt be keen to secure a large slice of the £16 billion extra defence funding budget announced by the Chancellor, but the situation at Rolls-Royce is one that must be avoided elsewhere. I still hope that the Government will intervene with Rolls-Royce. Workers at Barnoldswick are highly skilled. The jobs at Barnoldswick are exactly the type we need to create and retain in the United Kingdom. Defence projects must have a defence focus. It is vital for the short-term and long-term health of the UK economy.
I had the privilege of joining striking workers, Unite union reps, union officials and Labour colleagues on a virtual picket line last Friday. Striking workers are still there now, as I speak. I would like, once again, to express my unwavering solidarity with those workers, who are striking to save their jobs, not just for themselves and their families, but for future generations and for their community.
James Sunderland (Bracknell) (Con)
It is an honour to be called to speak in this important debate, Sir Charles. Having served in uniform for many years, I know a bit about defence procurement. I am also privileged to have used some of the best British-made equipment in the world.
In 2018-19, the Ministry of Defence spent £19.2 billion with UK industry and commerce, deliberately supporting 119,000 jobs. It is jobs that we are talking about today. In 2020, our commitment under the spending review is to spend an extra £16 billion, on top of the extra £8 billion that was promised in last year’s manifesto. That is exactly what the Ministry of Defence and our defence industry have been waiting for. Keeping people safe is the primary role of Government, but it is also about providing the commitment, the certainty and the spending guarantees that allow our nascent defence industry to plan ahead, at what is now well over 2% of GDP.
In the time I have today, I want to emphasise three key things. First, we have fantastic equipment in the UK. I am confident that, in the main, our forces have what they need. Secondly, I am proud to serve under a Conservative Government that get defence. Thirdly, we must spend responsibly and flexibly to secure what we need and to keep our British defence industry at the forefront of R&D, and to be able to produce competitive exports.
What do we have to be proud of right now? Lightning II, the F-35B aircraft, is an advanced, fifth generation aircraft, but it is American. Typhoon is another fantastic aircraft, and almost British. The Dreadnought to come is British, and is being built in Barrow. Our Astute boats are again British and being built in Barrow. The QE2 carriers—two of them—are British. Ajax is integrated in the UK, although it is not a UK platform. Type 26 frigates are British, Type 31 frigates are British, and the fleet solid support ships are British.
That is all good so far, but there is a note of caution. The message for post-Brexit UK is that we need to export our way out of trouble. To do that, we must showcase what we make and build. When we have a UK-based product or project with export potential we must back it, even if it involves some security compromise. We must also lower production costs to make it fit for the export market. We must develop a longer-term strategy to design and build UK equipment. That will avoid often substandard commercial off-the-shelf solutions. The UK must also design with export in mind. Expensive platforms are all very well, but we need to be able to sell them to those who do not have a huge amount of money in comparison, particularly to our emerging allies. As for legacy EU competition rules, the simple answer is no.
It is time now for liberal freedom of choice in public money to be over. For example, I do not want to see Hyundai police cars in Thames valley. The point extends across the whole of government. Let us invest in our British defence industry; let us relinquish these ridiculous EU competition rules; let us plan ahead, design for export and sell ourselves out of our financial woes with the most cost-effective kit that money can buy. Above all, we must build British, buy British and sell British to put us back on the map.
Sir Charles Walker (in the Chair
As everyone has been so well behaved, speakers can now have five minutes.
John Spellar (Warley) (Lab)
I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley) on securing the debate. He listed a number of criteria for people to be here. I tick two of the boxes: as a former union national officer and as a Minister. Indeed, I have been campaigning on this issue for many years, including when I was a Minister. I think colleagues need to understand that, underlying the debate, is a deep sickness within our civil service, which disregards, and even has a contempt for, manufacturing. It is laughable that we are having a debate with the EU over state aid when the Government refused to use the powers that they already have under European regulations. Quite frankly, other countries do not have to do that.
Let us take the example of the fleet solid support ships. France and Italy have ordered ships and prescribed that they be made in their own yards, and the same is true of the Germans. They use, interestingly enough, a foreign design, but they stipulate that the ships have to be built in German yards. There should never have been a question about this. There should have been a lot of work for our shipyards that would maintain a flow of work for the supply industries and, in particular, for the steel industry. Now there has been a welcome development in that the Secretary of State, who previously said that he would be putting out the invitation to bid in the spring, told a recent hearing of the Select Committee that that would happen shortly. I hope that that means that we are bringing that work forward. The Minister will be pleased to learn that I have been drawn to take part in Defence questions next week, when I shall be pursuing this issue.
We need to press on and do what would be taken as read in other countries. Companies understand that. They understand that if they are to sell in those other countries, they have to have substantial manufacturing bases there. Here they believe they can get away without having that. Furthermore, in its assessment of contracts, the Treasury refuses to consider the 30-odd per cent. that will come back to the Treasury directly in the form of the taxes paid by the workforce.
As the hon. Member for Bracknell (James Sunderland) pointed out, the problem goes across the board and includes police cars, fire engines, trains and, recently, hydrogen buses. We are putting lots of money into green hydrogen buses, and there is a nice picture of one in Tyne and Wear that clearly shows that it was made in China. The UK and the Scottish Governments are putting a lot of money into wind turbines, but a huge amount of the work is going overseas. As I said, no one else behaves like that.
I also draw attention to and praise the document from the Confederation of Shipbuilding and Engineering Unions on shovel-ready defence programmes. It argues that we should do what Germany and France are doing and bring work forward. We already know that we need the kit and have already contracted for it, so we can help those companies and, in particular, their long supply chains to keep their workforce and to continue investing in equipment if we bring forward orders for equipment that we already know about. That is also important for aerospace. The civil aerospace industry is flat on its back as a result of the aviation crisis. Helping the supply chain through help to military aerospace is enormously important. As the hon. Member for Bracknell said, the issue is also important for exports. People will come to our companies and say, “If it is not good enough for the British armed forces, why do you say it is good enough for us?”
It is not just about the companies but about the apprentices who are the skilled workforce of the future and the backbone of engineering. It is about good skilled jobs, often in communities that are at the centre of the levelling-up agenda across the country. Many of the companies depend on major plants that have satellite plants around them. They have served us well for many generations. We should back them now.
Kim Johnson (Liverpool, Riverside) (Lab)
Thank you, Sir Charles. I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley) on securing this timely and important debate. I welcome the opportunity to speak during this debate and to call on the Government to provide a multibillion pound boost to British jobs and to back British manufacturing by placing the defence orders that they have delayed over the last five years.
The UK is right now staring down the barrel of the biggest recession of any G7 country, on top of a decade of austerity and several more decades of disinvestment in manufacturing and industry in this country. We have been promised time and again that this Government will level up the economy by investing in our manufacturing sector. Protecting jobs and creating new ones will be the quickest way to get the country out of the economic crisis. Spending by the Ministry of Defence supports 119,000 jobs in the UK and nearly 4,500 apprenticeships—that is one in 220 jobs.
Strategic investment in our industrial and manufacturing infrastructure will play a vital role in ensuring that the British economy is able to weather the economic crisis resulting from the coronavirus pandemic. It will focus investment outside London and the south-east in areas that have suffered from a historic lack of investment and that are in desperate need of support to get through this crisis, particularly in the north-west.
The Confederation of Shipbuilding and Engineering Unions, representing over 100,000 skilled industrial and manufacturing workers, has called for the prioritisation of nine major shovel-ready defence projects to directly safeguard nearly 13,000 jobs during the recession. This investment will benefit the wider economy, cascading into supply chains, including thousands of small businesses across the country that supply components and software. I ask the Minister to commit today to protect all north-west defence jobs and to stimulate domestic industry at a crucial turning point in our economy by bringing forward spending for defence jobs, such as the fleet solid support ship, Type 26 frigate and phase 2 of the Tempest project. Lastly, I ask the Minister to intervene to stop Rolls-Royce from offshoring to Japan, Singapore and Spain and to protect all 350 jobs at the Barnoldswick site.
Jim Shannon (Strangford) (DUP)
Thank you. I was waiting for it to drop to two minutes. Other have not attended and I will do my best, indeed, I will keep within the five minutes as instructed. I congratulate the hon. Member for Birkenhead (Mick Whitley). I have been in two Westminster Hall debates with him and he always goes with good and important subjects. That there are so many members present indicates how important it is for all of us to be here.
There have been some fantastic contributions, but I want to make a big play if I can, as hon. Members would expect, for Northern Ireland. I look forward to the Minister’s response. He is always very helpful in his responses, and I look forward to what he will be able to do to encourage me and my constituents to buy British, to sell British and see that everything British is better, as the hon. Member for Bracknell (James Sunderland) said. I concur with that comment because I am as British as the hon. Gentleman and the United Kingdom of Great Britain and Northern Ireland, and I want to see those benefits coming to us as well.
Defence procurement must be based on a holistic view of the United Kingdom of Great Britain and Northern Ireland, ensuring that each region’s manufacturing or supply networks benefit from defence contracts. I welcome the Prime Minister and the Chancellor’s commitment to the £16.5 billion spend on defence, shipbuilding, space and cyber research and other sectors over a four period. That was a real commitment, a real shot in the arm, and we are all very pleased to see that.
Many independent aerospace manufacturers have capacity to build other products to a high standard and should be made aware of procurement opportunities. What work has been done with, for instance, Bombardier in Northern Ireland to ensure that we can take advantage of these projects as well? It is always great to read, as in the recent award of contract for 200 armoured vehicles in Telford, that the MIV programme aims to source 60% by value of the contract from within the United Kingdom of Great Britain and Northern Ireland. To achieve that, the team have engaged with suppliers in England, Wales, Scotland and Northern Ireland. Does the Minister agree that breakdowns of supply would be useful to ensure that there is a spread of British money across every part of the United Kingdom of Great Britain and Northern Ireland? I just want to ensure that we are all part of and benefit from this strategic overplay. It is good news.
The right hon. Member for Warley (John Spellar) referred to apprenticeships, and I want to make a quick play for them as well. I have been on to the Minister responsible—not this Minister, by the way—and made a play for apprenticeships to be available in Northern Ireland. Bombardier offers apprenticeships, and many other companies in this sector offer opportunities. I very much concur with the comments about the need to ensure that apprenticeship opportunities through this procurement programme will be available for each and every person.
The questions put to the Secretary of State back in June still stand today. I implored him to work with colleagues in defence to ensure that Northern Ireland skills were used in defence contracts, with special reference—I say this quite unashamedly—to the second-to-none aerospace manufacturing skills in Northern Ireland. I implore the defence team to recognise and deploy the skills in Northern Ireland—and, indeed, in all regions. I am not looking to take anything away from anybody else; that would be grossly unfair. All I want to do is ensure that we get our share of the pie, so to speak, when it comes to the opportunities from the defence budget and how that is disbursed across the whole of the United Kingdom of Great Britain and Northern Ireland.
I recognise the importance of defence spending and highlight the fact that availability of procurement contracts for the small independent manufacturers or suppliers could be the post-covid-19 lifeline for small and medium-sized firms. That is exactly the point that the hon. Member for Bracknell made in his contribution. It would be a very positive thing, and let us be positive about what we can do; there is positivity in where we are at this moment.
I will finish with this point. A written question from my hon. Friend the Member for Belfast East (Gavin Robinson) showed that the MOD spends per head per year approximately £60 in Northern Ireland as opposed to £850 in areas in the south of England. I will say it again: I am not taking the bread from anybody else’s mouth. I am just saying: can we have a share of that for Northern Ireland? I believe that if we can do that, we all benefit in this great country of the United Kingdom of Great Britain and Northern Ireland.
Sir Charles Walker (in the Chair)
I call Angela Crawley to speak for five minutes.
Angela Crawley (Lanark and Hamilton East) (SNP)
It is a pleasure to serve under your chairship, Sir Charles. I congratulate the hon. Member for Birkenhead (Mick Whitley) on securing this important debate about defence procurement and supply chains.
This debate is set in challenging times. We not only are living through the second wave of a global pandemic but are on course to leave the single market and the customs union by the end of this year. Therefore, I want to take a slightly different approach to the debate from that taken so far and highlight the fact that this problem is faced not only by this Government but by the many Governments around the world who are grappling with the self-inflicted harm that we are potentially causing and the unnecessary damage to people’s livelihoods and to our economy through Brexit.
The defence industry and those who work in that industry are not immune from the Brexit effect, and the end of the transition period is just a month away. This will undoubtedly have a damaging impact on the sector in the long term. The industry body, ADS, has reported that almost 30,000 jobs are already at risk as a result of covid-19. That will be compounded by leaving the world’s largest trading bloc without a deal.
The movement of skilled labour and the collaborative spending programmes of the EU allies will be negatively impacted by the decision to leave the European Union. That is summed up frankly, with the chief executive of ADS outlining the following:
“The UK’s aerospace, defence, space and security industries will face major disruption without a deal, through delays to cross-border trade, costly administrative requirements and a new regulatory system”.
Although defence supply chains are less intense, in terms of volume and complexity, than those of some commercial sectors, new processes at the borders and ports will ultimately create delays and additional logistical challenges for this sector.
Of course, much of this debate so far has rightly focused on the skills of the workforce, the essential role that that will play in the future and the significant contribution of the defence industry to the north and in Scotland. The announcement of £16.5 billion is welcome, of course, and it is necessary that that backing will go into the defence manufacturing industry as a whole as a vital means of support. We can do nothing but welcome that announcement.
As has been outlined, however, further jobs announcements by BAE, and the concerns raised by Rolls-Royce and others about the levelling-up agenda, deserve to be heard in further detail. I want to take this opportunity to highlight concerns on the Clyde about the future maritime support programme, its competition element, the potential fragmentation of contracts and the race to the bottom that could come of that. I would like the Minister to address those concerns directly.
I am conscious of time, so I will bring my speech to an end. It has been demonstrated that the lack of understanding of the strategic and logistical planning required—both for the pandemic and in the coming months with Brexit—needs to be considered in greater detail. The definition of “defence” should perhaps have been widened in this debate, to cover pandemic resilience and wider concerns with respect to climate change, but I do not have enough time to address that.
It is important that we consider the weaknesses in the defence supply chain—across many of our industries—that have been exposed by covid. We must learn the lessons of the pandemic, and whatever happens in the next few months, the UK Government must prepare for the impact of this critical economic change on the defence industry.
Stephen Morgan (Portsmouth South) (Lab)
It is a pleasure to serve under your chairmanship, Sir Charles. I thank my hon. Friend the Member for Birkenhead (Mick Whitley) for securing the debate on this important issue. As has been said, it is a timely debate—I absolutely agree—and I thank everyone for taking part. A number of excellent points have been made by colleagues on both sides of the House on the value of defence procurement and its wider economic benefits. I acknowledge those comments and will make a few broader points about the importance of defence procurement and personnel to the security and prosperity of our country.
I welcome the four-year funding settlement for defence announced by the Prime Minister last month. It is a long overdue upgrade to Britain’s defences after a decade of decline since 2010. The extra investment in R&D is important, not just for defence and security, but because, if managed correctly, it will have a positive multiplier effect in areas such as aerospace, maritime, higher education and the wider supply chain across the UK. I was particularly pleased to hear that, at such a difficult time for our economy, the funding is set to create 10,000 jobs a year and 40,000 jobs in total. We of course welcome that, and will hold the Government to account on it.
Labour wants to ensure that new jobs are created in all parts of the UK, which brings me to my central point. While the Prime Minister’s announcement of cash was welcome, the spending review figures confirm that the £16.5 billion injection is all capital spend, with day-to-day revenue funding for defence expected to flatline at around £31.5 billion per year. That equates to a 2.4% real-terms cut through to 2024-25. Inevitably, that will mean further cuts to our armed forces and armed forces jobs. What we saw from the Prime Minister was an announcement without a strategy. Capital investment is vital and long overdue, but it is nothing without personnel and staff to support it.
Labour stands squarely behind our armed forces, including everyone from squaddies to engineers, from caterers to staff at bases. Although the Government have made important commitments to infrastructure, the Ministry of Defence seems to have a blind spot for staff and service personnel. After the last defence review in 2015, the Government fudged the funding figures with efficiency savings and invest-to-saves, opening up a £13 billion budget black hole. They failed to recruit the troops that the UK needs, leaving the military 1,200 troops short of strength.
As we heard earlier, there is also continued concern about the splitting up of service contracts at our bases—the ongoing dispute at Her Majesty’s Naval Base, Clyde is an example. Over the last few years, some services have been subcontracted, leading to a downgrade in terms and conditions. Cleaners transferred from Babcock to ISS, for example, have seen their pensions decline and their sick pay reduced. Managed incorrectly, those contracts pit team members against each other and begin a race to the bottom on standards and working conditions for staff who are indispensable for day-to-day defence and security operations. When the Minister responds, I shall be keen to hear what he can do to reassure workers at Her Majesty’s Naval Base, Clyde.
The Clyde example is particularly important because, of course, Faslane is home to the continuous at-sea nuclear deterrent—an essential part of our nation’s defence infrastructure. I was fortunate enough to visit HMS Astute while she was alongside at Faslane in 2018, where we saw the expertise and dedication of service personnel aboard. It was during the week that Carillion collapsed, and as such was particularly instructive about the perils of mismanaging Government service contracts and the devastating impact this can have on vital services. Ministers must avoid the mistakes of the past, and place service personnel at the heart of defence and security operations. They must also use their significant buying power to drive up standards, and reinforce the high standards and working conditions that our personnel’s service and expertise deserves.
More broadly, this Government have an important opportunity to use defence procurement as a powerful lever to unleash prosperity in every region and every nation of the UK, including many areas that the Government claim they would like to level up. As ADS Group notes, the UK defence industry had a turnover of £22.7 billion in 2019, and directly supported 132,000 jobs, including 5,000 apprentices. Sadly, for five years Ministers dragged their feet on whether the Royal Fleet Auxiliary’s new fleet solid support ships would be built, as my hon. Friend the Member for Birkenhead has pointed out and my right hon. Friend the Member for Warley (John Spellar) tirelessly campaigns on and has reminded us of today.
There are concerns that the MOD may still accept bids from consortiums, including—even led by—foreign companies. As I have said previously, there are enormous benefits to rewarding defence contracts to British companies, outside of the obvious security benefits. From the revenue generated for the Exchequer to the higher national insurance contributions, building British is a no-brainer, so I say to the Government that what can be built in Britain must be built in Britain. The defence and security industrial strategy must also involve plans to develop the UK’s future capability to build in Britain. This will be one of the tests by which we will judge the Government’s long-awaited integrated review.
I have several asks of the Minister, and would be grateful if he could provide some clarity on these issues. First, when will the Government publish the defence and security industrial strategy and the associated integrated review? Will the new defence and security industrial strategy place the rights of staff, who are indispensable to day-to-day defence and security operations, at the very centre of Government procurement, or will it continue the trend of undercutting them, threatening to undermine the operation of vital defence and security assets? Finally, will the strategy make an unambiguous commitment to spending on, and building, all platforms and assets in the UK to help built British jobs? I look forward to the response from the Minister.
Today, we have heard a positive consensus from all sides about the new funding. Ministers must now make sure that they put that new money to best use. They must close the £13 billion black hole in the defence budget, recruit and properly value our service personnel, and build new military equipment here in Britain.
Sir Charles Walker (in the Chair)
Due to a rash of good behaviour, the Minister has acres of time in which to expand an argument and answer questions. However, would he please leave Mr Whitley two minutes at the end to wind up in his own way?
The Minister for Defence Procurement (Jeremy Quin)
I welcome this important debate, and congratulate the hon. Member for Birkenhead (Mick Whitley) on having secured it. This debate is particularly timely, as several hon. Members have reminded us, as it comes in the wake of an extremely positive bit of news. It is wonderful to see the Chamber united, with the hon. Member for Portsmouth South (Stephen Morgan) welcoming last week’s announcement. Even my friends from the Scottish National party have welcomed this investment in the defence of the United Kingdom, and I welcome the hon. Member for Lanark and Hamilton East (Angela Crawley) having done so. It is a £24 billion increase and, as has been suggested, that is a massive boost to the defence of the United Kingdom. It is the largest investment in 30 years—the largest since the end of the cold war—and I am so pleased that it has generated support in this Chamber this afternoon.
This is a timely debate not only because of that announcement, but because it comes at a point when “team defence” has done so much and performed so brilliantly in confronting the coronavirus pandemic. I begin by thanking the defence industry at every level for its positive and collaborative response to this once-in-a-hundred-years event.
At the heart of defence is a critical task of delivering equipment and support to our armed forces to enable them to continue their vital work. We were reminded of that by my hon. and gallant Friend the Member for Bracknell (James Sunderland) who served himself—it is the kit that our people need to do the job that they are called upon to do. Our partners in industry have risen to that challenge. They have done just that in providing support throughout the pandemic.
To assist them, the Department has actively supported the defence sector through the use of prepayments to maintain business continuity. Some £138 million has been paid on this basis to maintain that flow of cash right through the sector. That has been alongside our drumbeat of orders. I was grateful to hear the hon. Member for Neath (Christina Rees) mention the munitions contract with BAE. I hope that will benefit those employees. It is one of a number of contracts throughout Wales and the rest of the United Kingdom that have continued to be delivered through the course of this pandemic.
Just as we have been monitoring the health of 600 of our suppliers, we make clear to the clients their responsibility to actively engage and support the supply chain. We have engaged directly with ADS, which has been referred to, and with other trade bodies and it has been good to hear of the productive relationships that companies have enjoyed in supporting each other during this period.
As hon. Members have mentioned, the way in which the workforce has been throughout this has been particularly positive. I thank them for how they have adopted and adapted to necessarily different working practices to continue to supply our defence forces, pulling together in a common endeavour to support our forces. How everyone has stepped up to deliver this has been extremely welcome.
Grahame Morris
The Minister’s rhetoric is excellent, but in terms of the practicalities for fleet solid support ships, for Rolls-Royce, and the supply chain and the lift-fan blades for the STOL engines for the F-35 Lightning fighter, will the Minister recognise the important role of Government in giving direction to companies such as Rolls-Royce to ensure that that work is carried out here in the United Kingdom? It is part of our sovereign defence plan to ensure that we have security of supply over these vital components.
Jeremy Quin
I am grateful to the hon. Gentleman for his intervention. I recognise the passion with which he addresses the issue of the Rolls-Royce concerns at Barnoldswick and the current action there. I hope that can be brought to a conclusion. I know my colleagues have said much the same. I am not aware of any long-term plans to remove the F-35 components from outside the United Kingdom. I am not aware of them and I hope we can continue and maintain a productive relationship with Rolls-Royce.
We all know what a dreadful situation is confronted by the aerospace industry in general. In practice, in defence, we continue to invest and provide that lifeblood of support to our companies that I hope will enable them to remain and prosper inside the UK. I will come on to the FSS point made by the hon. Gentleman later in my remarks.
The proposer of this debate, the hon. Member for Birkenhead (Mick Whitley), mentioned Cammell Laird, which is in his constituency, and I congratulate the company on its work through the pandemic. It has done sterling work on the Type 45 power improvement programme, and it is great to see HMS Dauntless re-floated with key equipment installed and back on to trials. The company has also been working with the Royal Fleet Auxiliary—currently RFA Wave Knight and RFA Tidesurge. With them, and the work of other companies in the marine sector, Birkenhead continues to provide invaluable contributions to the defence and the UK’s wider prosperity.
More broadly, the north-west has one of the highest per capita defence equipment spends of any region in the country. These figures might upset the hon. Member for Strangford (Jim Shannon). The spend is £270 per head per year in the north-west, some way behind Scotland and indeed, Wales, but way ahead of Northern Ireland. The hon. Member for Strangford is absolutely right that we need to lift up and level up the economy.
Jim Shannon
We have an excellent MOD contractor in Thales in Belfast, which I know the Minister is aware of. It is very much involved in cyber-security. I encourage the Minister, when looking towards cyber-security contracts and procurement for the future, to note that Thales could perhaps very much feature in that.
Jeremy Quin
I have the gift of foresight. Only very recently, I was on a call with the First Minister of Northern Ireland with Northern Ireland defence contractors, talking about the opportunities that may come up. I know that the Chief of the Air Staff will be in the Province to talk about opportunities in aerospace, and we are minded to see how we can support all parts of the United Kingdom, absolutely including Northern Ireland.
To go back to the north-west, the Typhoon programme makes a significant contribution to the UK economy, generating billions of pounds through exports. That is an important issue, which my hon. and gallant Friend the Member for Bracknell raised. That will be enhanced not only by the recent radar development, which has secured in excess of 600 jobs, including 120 jobs at BAE Systems Warton in Lancashire, but also by the recently signed Quadriga contract, which secures further skilled manufacturing work to build parts of 38 new aircraft at BAE Systems Samlesbury, including engineering roles that are central to the UK’s future combat air ambitions.
We can be positive about the future for defence across the UK. The four-year settlement provides the financial certainty needed to pursue a radical modernisation programme to meet today’s threats and prepare for the future.
I urge the hon. Member for Portsmouth South to be a little patient. We have the funding envelope and we are looking forward to producing the integrated review and the defence and security industrial strategy. These are three important parts of the stool that will take us forward for the next few years. It is a platform for the future. I recognise the hon. Member’s eagerness to see those things announced. I would ask him to be patient a little longer. He is obviously happy with the first part of the stool—we have the other two legs to produce, and I hope to bring them forward as soon as practical. As he appreciates, these are cross-Government reports. We will bring them forward when we can.
The four-year settlement ensures that the armed forces will be able to adapt to the threat with cutting-edge technology, compete effectively in the information age and fight decisively when required. It will position the UK as a global leader in the new domains of cyber and space and transform the UK’s capabilities across sea, land and air.
As has been stated, it is underpinned by record investment of at least £6.6 billion on military research and development. I hope to encourage the hon. Member for Liverpool, Riverside (Kim Johnson), who is keen to see us committing to programmes. The announcement that the Prime Minister made confirmed our order of eight Type 26 and five Type 35 frigates.[Official Report, 7 December 2020, Vol. 685, c. 6MC.] It also supports a subject close to the heart of a number of people in this Chamber—the future of the fleet solid support ship programme, which will supply our carrier strike group, and which I know is of direct interest to the right hon. Member for Warley (John Spellar), as it is to the hon. Member for Birkenhead, among many Members. That is an ongoing process, as the right hon. Member for Warley knows; I look forward to his Defence question next week. The competition will be launched next year. I was going to say in the spring, which is but a short step away. We are looking forward to spring dawning.
Jeremy Quin
I give way to the right hon. Gentleman, as I thought I might have to.
John Spellar
This is absurd. We know what the requirement is. It has already been out to one tender. The only argument was about whether it was a warship. Why are the Government still dithering? Why do they not get the order there, let companies bid in and let their suppliers know and start tooling up and getting supply chains working? Why can they not get a move on?
Jeremy Quin
The right hon. Gentleman will be aware that these are warships, which I know he regards as a great step forward in our thinking, as we have learned more about how they will operate in the carrier strike group. He will just have to be a little more patient. We are getting on with the procurement. Come the spring, he will see that competition launched.
John Spellar
Why the delay? Quite frankly, they could always have been designated as warships, because they always had guns on them. What is holding it up now?
Jeremy Quin
First of all, we have had a delay in this programme for quite some time—I do not know if it goes quite back as far as the previous Administration, but it might well have done. For a long period, people have been thinking about the FSS and how exactly it should be incorporated. All I can say is that I am delighted that, very soon, the right hon. Gentleman’s pain will be over, with the competition being launched. I am pleased that we have reached that point. It is critical, as the right hon. Gentleman will agree, that the next competition is extremely well founded, well based and successful, and we are putting in place the basis to ensure that that is the case.
I must move on. Another major project of direct importance is the future combat air system, which is a truly strategic endeavour. It will build on the success of Typhoon and F-35 to again promote great jobs in engineering in our high engineering base in the north-west of England and throughout the UK. On land, our exciting £2.8 billion commitments to Boxer at Telford is now feeding through supply chain orders throughout the sector. All these programmes, whether at the cutting edge of maritime combat, air or land capabilities support jobs not only at tier 1, but throughout the supply chain, as has been said, with 119,000 directly employed and a further 80,000 or so employed through the defence supply chain. While decisions on the allocation of funding across the breadth of our capabilities will be made and announced in due course, this settlement will support skills and jobs, and apprenticeships, as mentioned by my hon. Friend the Member for Barrow and Furness (Simon Fell), throughout the UK.
In order to ensure a strategic approach, I announced earlier this year that we are leading a cross-Government review of the UK’s defence and security sectors. It will identify how we can ensure that we have competitive, innovative and world-class defence and security industries that drive research and investment. We recently launched the social value in procurement model which, to the hon. Member for Portsmouth South’s point, will provide another tool to ensure our major procurement projects evaluate priority social value themes and outcomes linked to prosperity. As part of the defence prosperity programme, we are working with industry and Government colleagues to develop a joint economic data hub within the UK Defence Solutions Centre to collect and aggregate economic data from across the sector. It will provide a better understanding of the economic contribution of the defence sector at a UK, national and regional level that can inform our decision-making process.
Throughout defence, we are committed to ensuring that we seize the opportunities provided by smaller companies. We are targeting a 25% spend with such companies. We have already hit 19%, up from 13% a couple of years prior to that. We are extremely mindful of the need to maintain a clear vision of our supply chain, and we are working through a Department-wide supply chain resilience and risk programme. Defence has some of the most complex supply chains and challenging procurement programmes across government. However, they contribute to the UK’s proud history of providing the skills, capabilities and equipment that keeps us and our allies safe, and I am convinced that, given the Government’s commitment, the UK will have an equally proud future.
Sir Charles Walker (in the Chair)
Mr Whitley, can you sum up this excellent debate, please?
Mick Whitley
I thank all hon. Members for their contributions, which have been fantastic. The debate has greatly benefited from the depth of their experience, insight and expertise. I am glad that we have achieved consensus on the important role that defence procurement has to play in supporting domestic industry, and I look forward to continuing this conversation in the weeks and months ahead. I especially thank the shadow Minister, my hon. Friend the Member for Portsmouth South (Stephen Morgan), and the Minister for giving up their time to contribute. As I said before, I hope that this is an issue on which we can collaborate in the future. I also thank you very much, Sir Charles.
Question put and agreed to.
Resolved,
That this House has considered defence procurement and supply chains.