Defence and Security Industrial Strategy
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The Minister for Defence Procurement (Jeremy Quin)
With permission, I should like to make a statement on the future defence and security industrial strategy. Last November, the Prime Minister announced he was increasing spending on defence by £24 billion over the next four years. Last week, the Government published their conclusions from the integrated review, the most comprehensive survey since the end of the cold war.
Yesterday, my right hon. Friend the Secretary of State for Defence set out what amounts to the biggest shift in defence policy for a generation—a policy that will see us reinvesting, re-equipping and reorganising to face the threats of tomorrow. In doing so, he reconfirmed this Government’s commitment to spend more than £85 billion over the next four years on equipment and support for our armed forces. That reflects the fact that our armed forces will need to be present and persistent, and agile and adaptable in an ever-evolving threat landscape. That is why it almost goes without saying that the most important thing in defence procurement is ensuring our people have the right capability, at the right time, to preserve our national security.
Our success hinges on a productive relationship with industry. The UK’s defence and security industry is world-renowned. Ministry of Defence spending in the sector secures more than 200,000 direct and indirect jobs across the UK, while the industry’s success as the world’s second largest global exporter of defence goods and services supports many thousands more. The sector provides our deterrent and underpins our critical national infrastructure. Through the MOD’s £300 per capita spend across the UK, it generates valuable skills and technology. The security industry alongside it, of more than 6,000 companies, is a font of enterprise and entrepreneurship. Last year, cyber-security firms raised more than twice as much investment as they had in 2019.
Overall, defence and security is one of the binding elements of our successful Union. Our world-class workforce builds everything from submarines to Typhoons right across the country. We have frigates made in Scotland, satellites in Belfast, next generation Ajax armoured vehicle technology in Wales and aircraft production in the north of England. We must never take for granted these industries, the skills they develop or the contribution they make to UK resilience, operational capability and prosperity. We must do more to recognise explicitly the social value that Government procurement can generate throughout the Union.
To ensure that we continue to have onshore capabilities that meet our needs and continue to generate prosperity long into the future, I am today publishing our defence and security industrial strategy. I am pleased to say the strategy is a detailed policy document, and rightly so, but its significance can be summed up in a few sentences. It signals a shift away from global competition by default towards a more flexible, nuanced approach. It provides, and we will continue to provide, greater clarity about the technology we seek and the market implications long before we launch into the market, allowing companies to research, invest and upskill. It identifies where global competition may not be compatible with our national security requirements and, at last, it regards industry as a strategic capability in its own right—an industry we must devote our attention to if we are to maintain our operational independence.
Today, I want to highlight three themes in particular that are at the heart of DSIS. The first is our ability to work together to generate growth and prosperity across the Union. DSIS sets the framework for greater integration between Government, industry and academia. It will see us working more closely, too, with top-flight research and those companies, great and small, that make this country so celebrated in the field of innovation. Through a better understanding of requirements, companies will be able to seize opportunities, pool resources and upskill to deliver cutting-edge capability onshore in the UK.
That is a framework that works. Our future combat air system shows that the principles of DSIS are already delivering. A fundamental strategic decision for this country, it will ensure UK air power continues at the cutting edge as it evolves through this decade and beyond. We are investing more than £2 billion over the next four years in this British-led international collaboration, safe in the knowledge that it will leverage hundreds of millions of pounds of investment from the corporate sector. These future systems will not just build technology but develop skills and create opportunity for 2,500 apprentices over the next five years. “Generation Tempest”, as we have dubbed this cohort of future talent, will, in turn, create extraordinary export opportunities with our friends and allies overseas.
Of course, competition remains critical in many areas. Even where we have already developed close partnerships at the prime level, we will expect to see productivity incentivised and innovation encouraged. Across all our national security procurement, DSIS will mean more transparency, more clarity of our requirements and a more co-operative approach to business. We are replicating this joint approach in other sectors: ensuring that we deliver our strategic imperatives, from nuclear to crypt-key; complex and novel weapons; and new opportunities that are opening up in areas such as armoured vehicles as we develop a new land industrial strategy.
Critically, our spending on FCAS reflects an increased willingness to invest in research and development. Overall, we are investing more than £6.6 billion in R&D over the next four years. That will support next-generation capabilities, from space satellites and automation to artificial intelligence and novel weapons. The message that our R&D spend sends, coupled with the clear direction of travel we are providing about our future priorities, will give businesses the confidence to invest.
That brings me to another key element: we must forge stronger international partnerships. By doing more R&D, we will keep ourselves current and encourage the very best from outside these shores to collaborate with UK companies. I have already mentioned FCAS as one example of how a UK-led collaboration with allies and partners can work, but we see it elsewhere in other air programmes, such as the UK’s significant contribution to the US F-35 stealth fighter or our ongoing investment in Typhoon with our European partners. Time and again, we see how international collaboration can deliver the very best kit for our people.
As part of this international emphasis, DSIS also puts a renewed focus on exports. As we demand more of industry to meet our requirements, so we need to offer it more support to win abroad and deliver economies of scale. It is because of our recent investments in maritime that I am the first Minister for Defence Procurement in a generation to talk about selling our state-of- the-art ship designs to our close friends in Australia and Canada, in respect of the Type 26, and, we hope, to others around the world. Notably, our Type 31 is a frigate that will be multi-purpose and has been specifically designed with the needs of international partners in mind.
Our integrated review seeks to capitalise on this new export-led approach, not only setting out our plans to deliver the eight Type 26s and five Type 31s but highlighting our investments in next-generation naval vessels, including Type 32 frigates and fleet solid support ships. We believe it is time to spark a renaissance in British shipbuilding. That is why we are today changing our naval procurement policy to make clear our ability to choose to procure warships of any description here in the UK.
The third and final theme of DSIS that I want to highlight is achieving real reform in how we procure. Some of this is about driving pace and better working inside the MOD to deliver capabilities at the speed of relevance, but it is also about changing how we interact with our suppliers, reforming the Defence and Security Public Contracts Regulations 2011 to focus more on innovation and increasing the agility of acquisition. We are adopting the social value procurement policy to ensure that wider qualities such as skills creation or supply chain resilience are explicitly taken into account in tender evaluation. That will be mandatory under DSPCR from 1 June.
We will be doing more to incentivise continuous improvement in single-source procurement. We want to ensure that the supply chains of our primes are constantly open to innovators, and we want to ensure that our fantastic small and medium-sized enterprises—the lifeblood of defence—get a fair chance when it comes to winning work, not least from inward investors whose interest and investment in the UK we will continue to welcome.
DSIS signals a step change in our approach to the defence and security industrial sectors. Ultimately, DSIS will make a huge difference to our nation’s defence. It will help retain onshore critical industries for our national security and our future. It will help us develop advanced skills and capabilities. It will help us realise the Prime Minister’s vision of the UK as a science superpower. With defence procurement benefiting every part of our Union, it will help galvanise our levelling-up agenda, creating a virtuous circle whereby the support we provide to those who defend and protect us becomes a catalyst that propels jobs, skills and prosperity in every corner of our United Kingdom. I commend this statement to the House.
John Healey (Wentworth and Dearne) (Lab)
On this day, when we mark a full year since the country first went into lockdown, may I use this statement to pay tribute to the men and women of the armed forces, who have done so much to help the country through this pandemic? I also pay tribute to the men and women who work in our UK defence sector. They, too, responded rapidly, making personal protective equipment and ventilators, and they play a vital part in designing, producing and maintaining the equipment our forces need.
Labour welcomes the publication of this strategy; indeed, the very use of the term “strategy” is something of a victory in itself. We welcome the confirmation that global competition by default, begun by the White Paper in 2012, has gone; it is high time we put an end to a British Government being just as happy buying abroad as building in Britain. We also welcome the change to naval procurement policy, and we welcome the commitment to invest £6.6 billion in defence research and development over the next four years.
However, there is a question at the heart of this strategy: is this the start of a new era, with the aim not just to make in Britain and maintain in Britain, but to develop now the technologies and companies that we will need in 10 years’ time to procure in Britain? Labour’s determination to see British investment directed first to British industry is fundamental. When done well, that strengthens our UK economy and, as covid has exposed the risks of relying on foreign supply chains, it also has the potential to strengthen our UK sovereignty and our security. We therefore want a higher bar set for any decision to procure Britain’s defence equipment from other countries. Will the Minister state today, in the clearest possible terms, the Government’s commitment to build in Britain? How will this strategy strengthen the UK’s defence resilience by growing our sovereign capacity to replace equipment if it is lost in conflict? What is the strategy to boost Britain’s foundation industries linked to defence, such as steel?
This strategy demands a massive change in mindset in the MOD and the military, which only Ministers can lead, so will the Minister commit to publishing an update on progress, with another oral statement to the House one year from now, not least so that we can judge the Prime Minister’s boast in launching the integrated view that we will open up
“new vistas of economic progress, creating 10,000 jobs every year”—[Official Report, 19 November 2020; Vol. 684, c. 488.]
Let me turn to the money. We welcomed the Prime Minister’s extra £16.5 billion in capital funding after the last decade of decline, and we welcome the detail set out by the Minister today, but 30,000 jobs in the defence industry have gone since 2010, and nearly £420 million in real terms has been cut in defence R&D, so in many UK regions the money promised today will still be well short of what has been taken away over the last decade. With the National Audit Office reporting a black hole in the defence budget of up to £17 billion, and with the permanent secretary telling the Public Accounts Committee that not all is
“going to go on new and revolutionary kit”,
exactly how much of this extra money will be swallowed by the black hole in current programmes?
The MOD’s bad habits run deep. Only three of the MOD’s 30 major projects have a clear Government green light on time and on budget. The Prime Minister told the House:
“We are setting up a unit to ensure that we get value out of this massive package.”—[Official Report, 19 November 2020; Vol. 684, c. 499.]
I have tabled the same set of questions to the Minister twice now about the progress, powers and personnel of this unit, and he has given the same evasive non-answers both times, so now is a good time for him to level with the whole House. Will he admit that there is no unit and no plan for a unit? The Prime Minister was making it up, was he not? The important point is this: without a revolution in the way that the MOD controls procurement costs, we are doomed to see it repeat the mistakes of the past.
Yesterday, the Defence Secretary asked our forces to do more with less. Today, the Minister is asking industry to do more with more. This is a big, one-off opportunity. Ministers have got to get this right. It is no good in two years’ time if the NAO still says that the military equipment plan is unaffordable and still says there is a black hole in the defence budget. Does the Minister accept that the single challenge for the MOD now is delivery, delivery, delivery? On behalf of the British people and British forces, we will hold them hard to account for exactly that.
Jeremy Quin
I am delighted to confirm that the next years will be all about delivery, delivery, delivery, based on the sound financial footing that this defence settlement has given us. I am very proud of what we have achieved with the plans that we have set out, and I am convinced that we will be able to meet the challenge that has been set for us in order to ensure that we are investing properly for the future.
I thank the right hon. Gentleman for his comments about the armed forces’ contribution during covid. They are sincerely meant, and I know they will be welcomed across the armed forces. I also thank him for his comments about the defence sector. It rose to the challenge as team UK, with unions and management continuing to deliver for the public good.
I welcome the right hon. Gentleman’s commitment to support us on moving away from global competition by default, as well as his comments on naval procurement and his welcoming of the £6.6 billion for R&D. I have good news for him: this policy absolutely gives us the ability to set out right from the outset what we are trying to achieve from a tender. It is not only about making certain we have the best equipment for our armed forces, but about what else we can get for that in the national interest, ensuring that we maximise our social value. That will come through in the awarding of the marks in the tender, which, as I have said, will be compulsory as of 1 June. I believe that we will get a lot out of the strategy. We will see more equipment built in Britain, both by UK companies and by those collaborating with us.
The right hon. Gentleman then strayed into some of the economics of the task. I was in the Treasury under the last Labour Administration, and we could have a discussion about the state of the national finances in 2010 if he chose to have one, and the £36 billion black hole left in the Ministry of Defence. [Interruption.] I hear chuntering. I have an excellent article from The Guardian that will confirm it, but I will share it at a later date. There was a significant black hole left, and I regret that there were jobs lost over that period. I hope we will not be so lackadaisical about exports that can maintain jobs, but there is a long lag time on that. I am proud to see the investment we are now putting into our defence. We make no mistake in what we say about our equipment plan over the past four years—it has clearly been unaffordable, and the permanent secretary has made clear that that is the case. We now have a strong basis on which to deliver.
To reassure the right hon. Gentleman, he mentioned that there are only three green lights, and I think he is referring to the Government major projects portfolio, where the senior responsible owners themselves highlight at-risk projects. There is only one thing more scary than projects that are delayed or do not hit their costings, and that is when SROs are unaware of it. I am pleased we have people who are all over the detail and are focusing on making certain that these projects work. I would rather problems were highlighted so they can be addressed.
To help address that issue, we are doubling the number of projects that are going to be looked at through the defence major projects portfolio. That will go up to 65. That will ensure that at the centre in the Ministry of Defence, we are keeping a close eye on what the top-level budgets are delivering and making certain that we are continuing to deliver those programmes to time and cost. We continue to upgrade Defence Equipment and Support. The number of those trained at senior commercial standard will have risen from 125 to 200 by the end of this year, and we are determined to continue to deliver on the DE&S transformation plan.
I am very optimistic for the future. I am optimistic that, working together with industry, we can continue to deliver a fine UK defence industry of which we can all be proud and that will continue to deliver the protection, equipment and lethality that our troops continue to need to be effective in meeting the challenges in the year ahead.
Mr Tobias Ellwood (Bournemouth East) (Con)
It has been a busy week for defence, with the publication of the integrated review confirming Britain’s ambitions on the international stage and advancing our defence posture, and now we have today’s publication of the defence and security industrial strategy, which advances our procurement capabilities and supports UK industry. I cannot offer too much comment, however, because the Minister, unlike his boss, has chosen to introduce this to Parliament first rather than giving us teasers in the media over the last couple of weeks, but on the face of it he is to be congratulated because we are seeing an advancement of the UK industrial base and support for British exports. Indeed, he has done such a good job and is doing such fantastic work as Minister for Defence Procurement that I am now worried that he might be rotated and moved on. I hope he will have time to appear before the Defence Committee, however, to talk in detail about this important work.
I have one question on international collaboration. The Minister talked about Tempest. That is a joint effort, but in NATO there is another project of equal complexity run by the French, FCAS. Is it not time that we recognised that these two efforts should be merged, because experience with the F-35 indicates that once we pay for these things there is not the total amount of funds available to buy the full complement? We have gone down from 138 to 48 today.
Jeremy Quin
I appreciate that my right hon. Friend has not yet had a chance to go through this in detail, and I apologise if he did not got a copy in advance, but I would be delighted to appear before the Select Committee; I look forward to being grilled in due course and to explaining the policy in more detail.
My right hon. Friend raised the specific matter of FCAS. We are very proud of this programme. It will be very good news for the north-west of England—for Lancashire, of course—and throughout the country. There is form in Europe for having multiple aircraft productions going on at the same time. In fact, we have moved from three, with Rafale and I am trying to remember the name of the Swedish plane, which I should not forget. [Interruption.] Yes, but at least three have been going on in the past, with Typhoon, and I believe that there is room in Europe to have more than one project. We have different timescales and requirements from our French friends, but we are making a very positive commitment to FCAS: £2 billion of investment, and that will be leveraged with hundreds of millions of pounds from our industrial partners. So we will carry on advancing this; I believe we have a great prospect ahead of us, and if other international partners wish to join us, the phone is on my desk.
Angela Crawley (Lanark and Hamilton East) (SNP) [V]
May I join others in paying tribute to the armed forces and their contribution to addressing the covid pandemic?
We on the Scottish National party Benches welcome the Government’s £188 billion increase in defence spending over the coming four years. However, it is clear that the Government are breaking their commitments on personal welfare, numbers and capacity.
The SNP has consistently called on the UK Government to guarantee that any future contracts for warships benefit Scotland’s shipyards, so I welcome the investment in shipbuilding and the new procurement strategy. The Minister must, however, commit to ensuring that the UK, and specifically the Clyde, will benefit from this investment, and any clarity the Minister can offer on these contracts will be welcome.
It remains unclear how a post-Brexit UK will co-operate with EU countries on security. Continued co-operation with the EU on defence procurement is in the best interests of the UK industry and would continue to allow the UK to be at the forefront. However, the lack in the review of a formal security treaty with the EU is a massive oversight. Can the Minister give us any assurance that the UK will be pursuing the administrative agreement with the European Defence Agency and the European defence fund? Investment in research and development and in apprenticeships to maintain our crucial skills base and strategic capabilities is essential, and new capacity in cyber-intelligence and space is welcome, but these increases must not come at the cost of conventional forces.
I must also address the elephant in the room: Trident. At a time when the equipment plan remains unaffordable, we are increasing the UK stockpile of nuclear warheads and the UK Government might well find themselves on the wrong side of international law given their commitment to non-proliferation. The UK Government have repeatedly set out their commitments to conventional forces, the armed forces covenant and long-term nuclear non-proliferation, all of which the SNP support. This integrated review stands in clear contradiction to those commitments. The UK must start matching its capabilities to its threats, and stop neglecting the real priorities.
Jeremy Quin
I thank the hon. Lady, but first I want to reassure my right hon. Friend the Member for Bournemouth East (Mr Ellwood) that I have remembered the name I forgot earlier; it is Gripen, of course—that is what I should have been referring to. I thank the various people who have tried to help me out on that—[Interruption]—which is mainly my staff; the right hon. Member for North Durham (Mr Jones) is correct.
Turning to the question, first I thank the hon. Member for Lanark and Hamilton East (Angela Crawley) for her support for our naval warships policy. This is very good news for the Clyde and for Rosyth. We have existing frigate orders going through now and we will be setting out the new national shipbuilding strategy, which will outline in more detail further orders that will be coming in in the years ahead, many of which will—I have absolutely no doubt—benefit UK yards in many different ways, including the yards in Scotland. It is a real step change in shipbuilding. People should take a huge amount of comfort from the investment that we are placing in shipbuilding and it should be a real signal for shipbuilders around the UK to invest in their yards, skills and capabilities for the future.
I also point out that Scotland is not only about shipbuilding. It was a great pleasure to award contracts to Thales in relation to sonar this time last year and Boxer, based in Glasgow, and to Leonardo, with its fantastic work on radar in Edinburgh. There is a huge amount of capability in Scotland, which is one of the reasons why it has £380 per capita of defence equipment and support investment going on there, as opposed to £300 per head of population in the UK as a whole. Scotland can be really proud of the contribution that it makes to UK defence.
We have, and continue to have, great relationships with our European partners. We work closely with the Germans, the French and all those across the EU and we will continue to do so. We have close relationships regarding FCAS, as my right hon. Friend the Member for Bournemouth East (Mr Ellwood) said. We will continue to work to ensure that we have good relationships with them going forward, as well as others.
Lastly, on nuclear weapons, I know the position of the hon. Member for Lanark and Hamilton East (Angela Crawley) and that of the SNP. Parliament voted to upgrade our nuclear weaponry to ensure that we maintained a credible, minimal, independent nuclear deterrent. That is what we are doing and I can reassure her that this equipment plan is indeed affordable.
Richard Drax (South Dorset) (Con) [V]
I was not on the call list for yesterday’s statement by the Defence Secretary, but I am appalled and shocked that the Army’s critical mass is being further cut to 72,500. Regarding procurement and the historical failure of the MOD to achieve value for money for the taxpayer, on behalf of the many defence companies across the UK that desperately need certainty, not least to achieve economy of scale, I seek my hon. Friend’s guarantee that the number of ships, planes and armoured fighting vehicles and equipment promised yesterday will actually be built and manufactured, and not delayed or stopped, as has happened all too frequently in the past.
Jeremy Quin
My hon. Friend has my assurance. This is the incredible value—it has been difficult to get there, and I recognise, as he does, that tough choices have had to be made, but we have got the books to balance. That is what is so critical. I will be speaking to companies this afternoon and during the course of tomorrow. They need to know that we have our ambitions and our funding into the same place, so that when I look them in the eye and talk about the orders that we will be placing in future, they can look with confidence and know that they can put investment into that, into their workforce and into their capital to ensure that they can meet our needs.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
May I also pay tribute to our armed forces personnel for their role during the pandemic? Their work has been fantastic and it has been all over the UK, including in the very far north of Scotland in my constituency. It seems to me that this is one of the benefits of being a United Kingdom, so that the United Kingdom armed forces can do these things, and I am sorry that my hon. Friend the Member for West Dunbartonshire (Martin Docherty-Hughes) is not with us today.
A great deal of our precious gold has been spent on our splendid two new aircraft carriers. In future, will there be enough surface ships to mount protective screens for these two precious aircraft carriers? And if both these aircraft carriers are at sea with sufficient protective screens, where will that leave the rest of the Royal Navy’s surface fleet if it has to mount a non-aircraft carrier-led operation?
Jeremy Quin
I thank the hon. Gentleman for his warm gratitude to the armed forces. He is absolutely right; they have been spread right across the United Kingdom. I think I am right in saying that the last time I looked at the numbers, we had 1,800 troops still deployed, of which 500 were deployed in Scotland, helping on covid-related tasks. What he says will be much appreciated by all those who are involved at present.
On our protective screens to the aircraft carriers, the hon. Gentleman is absolutely right that it is essential that we are able to provide them with carrier strike groups. We are very proud of that carrier strike group going out later this year. We will have sufficient frigates and destroyers to meet those requirements. There will be a dip, which has been publicised, with the retirement of two Type 23s, but we will be looking to 20 or more destroyers and frigates in short order; orders are being placed and we will ensure that we have them. I should also mention that we believe we have increased availability from the destroyers and frigates currently in our fleet, and the OPVs—offshore patrol vehicles—also help lessen the load on some of those frigates and destroyers, so I am confident we will be able to meet the requirements he sets out.
Alun Cairns (Vale of Glamorgan) (Con) [V]
I, too, congratulate our armed forces on, and thank them for, all of their work over the past year in combating covid, particularly through the vaccine roll-out. I also congratulate my hon. Friend on his statement. He will have seen some of the best of innovation in new technology in defence when he visited the Sierra Nevada Corporation in St Athan in my constituency a few months ago. Does he recognise that established brands, often with long-standing relationships with the MOD, are often seen to be less of a risk in comparison with new, young, innovative companies that could offer new opportunities for the MOD? So will he agree to offering guidance throughout the procurement process when there is a better opportunity for partnerships with young innovative companies, which might be seen to be an opportunity with less risk at that time?
Jeremy Quin
I thank my right hon. Friend for his question and I well remember visiting the Sierra Nevada Corporation with him last year—it was an eye opener. I hope that it is seeing opportunities from various changes to the Army, including the ranges. I am sure those there will be putting their minds to it. We will be publishing later this year a refresh of our small and medium-sized enterprises action plan. I am proud that we have driven up the amount of funds going to SMEs to more than 19%, from about 13% in 2013-14. There is more work to be done, and in order to help that process not only are we ensuring that we are maintaining DASA—the Defence and Security Accelerator—a fantastic process of providing seedcorn funding to develop smaller companies and give opportunities to help the MOD—but we will be expanding from Northern Ireland to across the whole UK the defence technology accelerator, which has been working very well in Northern Ireland. It helps to exploit and pull through technology that is being developed by smaller companies. So there will be a package of support and an SME action plan will be produced later this year.
Mr Kevan Jones (North Durham) (Lab)
I welcome today’s publication of the defence strategy. Sadly, it is 11 years late; for the past few years it has been called for. The UK has rightly got an open defence market, which has led to innovation, investment and world-beating kit for our armed forces, but it has also been used as an opportunity by the Treasury, in particular, and the MOD to buy off the shelf from overseas nations, without any commitment at all to investment in jobs and technology in this country. What steps is the Minister going to take to implement the very good recommendations in the report from the right hon. Member for Ludlow (Philip Dunne) on prosperity? How will that have an effect and ensure that jobs and investment go into the UK, rather than have the simple, knee-jerk reaction from the Treasury always to buy from abroad?
Jeremy Quin
I thank the right hon. Gentleman for his question. He has beaten me to it, because I was going to say suitably warm words about my right hon. Friend the Member for Ludlow when he addresses the House later in this session. The right hon. Gentleman is right to say that that report in 2018 was incredibly influential and very helpful in setting out not only the prosperity agenda that was announced in March 2019, but this paper. Two changes should warm the heart of the right hon. Gentleman. [Interruption.] I will do my best. The first is that as we look at new procurements right from the outset we will be looking to think, “What are we going to get out of this, not just for the kit we need for our forces—what is the broader impact? What else can we do to secure prosperity, which, after all is a defence task, through the orders we place and how we go about it?” We will be taking that nuanced approach, looking at each one in turn, on a case-by-case basis, to see what can be achieved. Of course there will be occasions when off the shelf is the best option, but for every one that needs to be tested, considered and thought through. Secondly, I am very proud that we are going to be ensuring that social value is always applied to our tender process. So this will be a minimum of 10%. It will be compulsory from 1 June, in respect of DSPCR—Defence and Security Public Contracts Regulations 2011. This is about making certain that through that mechanism we catch the whole benefit that a procurement can make.
Damian Hinds (East Hampshire) (Con)
I strongly welcome my hon. Friend’s statement and the strategy, including what he outlined on the deepened working with industry and academia. Can he say how the strategy can help build the UK’s skills base in key STEM subjects, which is obviously very important for defence industries, but also for important parts of the wider civil economy?
Jeremy Quin
This is a great opportunity to build our skills base and our number of apprentices. My right hon. Friend will have heard what I said about FCAS and Team Tempest and that new generation coming through—people are very excited about the prospect of working on this new system—but it is broader than that. I particularly pay tribute to the work of the RAF across Wales in bringing on STEM skills. The whole of the armed forces are acutely aware that our future is going to be digital, cyber and highly technological, and we as a country need to have that STEM support. I know that this strategy, with its £6.6 billion minimum spend on R&D over the next four years, will help to deliver just that.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I welcome that we are getting more clarity on some of the issues around defence spending, and particularly the Minister’s bold statement that he wants to see us
“achieving real reform in how we procure.”
It would be great if we saw some of that go down to our SMEs. However, as he knows, the National Audit Office concluded in its recent report on the defence equipment plan that the Department
“continues to make over-optimistic and inconsistent judgements when forecasting costs.”
That information comes from the Department’s own cost assurance and analysis service. Can the Minister tell the House and the country what precisely he is going to do differently to ensure that procurement and cost management in the equipment plan is managed better? What precise actions is he going to take?
Jeremy Quin
I thank the hon. Lady’s Committee for its report in the summer, which was no holds barred; we have lessons to learn. We are endeavouring to ensure that we answer each of the points made in that report in turn and that we learn from the report and its findings. It is also important that we lay before the Committee an enhanced equipment plan. We are working on that right now. I think it is best that we do that properly, alongside the NAO, so that we work with it and make certain that we have a detailed plan that can be put out for scrutiny. We have that plan, but we need to make certain that the NAO is equally comfortable with it.
The hon. Lady will recognise that, in any organisation with 6,500 contracts, there are going to be ones where we run into problems—that is the experience of the commercial world as well as Government—but we need to do better. So we have enhanced the number of people who are trained to a very senior level in terms of commercial expertise in DE&S; as I say, that is going up to 200 by the end of this year. We are putting more emphasis on where we look at the centre at projects, rather than leaving it entirely with the TLBs. We will bring out up to 65 major projects—not necessarily on a financial basis; there can be some that are low in value but high risk in terms of delivery—starting from the centre, through the defence major projects initiative.
With the help of the Infrastructure and Projects Authority, for which I am grateful, I am reviewing our senior responsible officer structure, to make certain that our SROs, who do a good job but quite a lot of whom are quite stretched, have more individual responsibility and that people are all over the detail of their projects. I hope that in combination, alongside a reform of DSPCR in the single source contract regulations, we may be in a better place to not necessarily please the hon. Lady’s Committee but at least do our best to meet the requirements that it has set.
Bob Blackman (Harrow East) (Con) [V]
Can my hon. Friend confirm exactly how many new ships will be ordered, that they will be built in Britain, and that they will be given the opportunity to be at sea advancing Britain’s interests rather than just remaining in port gathering dust?
Jeremy Quin
On my hon. Friend’s last point, we are very focused on increasing availability to make certain that our ships are where they should be—at sea, often present. The example we have set with HMS Montrose of having the crew going out to the ship rather than the ship endlessly coming to and from is a great example of how our ships can be more present and more persistent and have more influence around the world.
Yes, there will be more ships; we will set out more detail in the shipbuilding strategy, which will look not only at the Royal Navy but across the totality of Government expenditure on shipbuilding. There will be good news—more good news—on shipbuilding in the UK; of that I have absolutely no doubt. We have set out our numbers—eight Type 26s and five Type 31s—but in addition there will be more news on Type 32s and other vessels that we will be procuring, including the fleet solid support ships.
John Spellar (Warley) (Lab)
On the fleet solid support ships, the announcement is of course enormously welcome, but why has it taken us—particularly my right hon. Friend the Member for North Durham (Mr Jones) and I—so long to persuade Ministers to designate them as naval vessels, as they have done today? Similarly, it is good that we are moving away from global by default, but why not behave like every other industrial country by looking after our own industry and making it clear to officials right the way down the line that the policy is now British by default?
Jeremy Quin
I know that the right hon. Gentleman and the right hon. Member for North Durham (Mr Jones) have been assiduous. I once accused him of being a cracked record, but at least it was a very patriotic tune. I appreciate his campaign and that of the right hon. Member for North Durham. They were pushing on an open door. We wanted to make certain that FSS has a lot of value to the UK in broad terms, as well as to the Royal Navy. More information will be given on that in due course.
I can guarantee that we will have a good close working relationship with our naval shipbuilders. I look forward to more orders coming their way in the future as we see the full benefit of our national shipbuilding programme play out in the years and decades ahead. I have no doubt that this strategy will signal a renaissance in our relationship with onshore building in the UK, but it is a nuanced approach; we are making certain that we get the kit we need in the best way we possibly can.
Gavin Newlands (Paisley and Renfrewshire North) (SNP) [V]
Over the last decade, armed forces pay has only risen by about half the rate of inflation and yet again this Government, who so value their forces, have shamefully deigned to freeze their pay. While the Government are cutting conventional forces again, it has been estimated that Trident may cost as much as £205 billion. Will the Minister confirm the additional costs of these new pointless and immoral warheads, and can he tell forces personnel why his Government have prioritised these unusable and obscene weapons over their jobs and standard of living?
Jeremy Quin
The hon. Gentleman could persuade his colleagues in the Scottish Parliament to ease the burden of tax that has fallen on our regular services, who are there in Scotland doing their bit for every part of the UK and who are being taxed more than they are elsewhere in the UK. A first step would be to give that money back to the armed forces personnel concerned.
I turn to our nuclear policy. I understand the hon. Gentleman’s position; he is not a supporter of a nuclear deterrent. But this House is. This House decided that we needed to have and to maintain a credible minimum nuclear deterrent, and that is what we will do.
Sir Edward Leigh (Gainsborough) (Con)
The Minister, in his statement, talked of a productive relationship with the industry. One way in which the MOD can have a far more productive relationship with the industry is through the use of MOD sites that become surplus to requirements. The Ministry has announced that RAF Scampton is to close in 2022, although there is now a rumour that it might stay open. In the past when the RAF has walked away from a base, it has pulled out the plug and left behind low-grade housing and farmland; we have enough farmland in Lincolnshire, including 600 square miles in my constituency. I want the Minister to promise me today that he will really get going on RAF Scampton when it becomes surplus to requirements and try to make it a hub for industry—an exciting place, not just inadequate housing and farmland. Will he take action this day?
Jeremy Quin
Action this day, Mr Speaker. First, I can reassure my right hon. Friend that the date is the same; it will be 2022. I was under the impression that my officials were speaking with the local council. I sincerely hope that is the case. I will follow it up today. If there is any dilatory behaviour, I will get back to my right hon. Friend, but I hope that is not the case and that decisions are being progressed.
Dame Angela Eagle (Wallasey) (Lab) [V]
Perhaps we will have to wait for the shipbuilding strategy document, but will the Minister tell us what action his Department is taking to ensure that a very high percentage of domestically produced steel will be used in the build of the next generation of Royal Navy ships and that the work will be done in British shipyards, not least Cammell Laird in Birkenhead?
Jeremy Quin
We are grateful for the work of Cammell Laird on the Royal Fleet Auxiliary, and the company continues to perform on our power improvement project for the Type 45s. It does a good job by us.
Decisions on steel are made by our primes, but the hon. Lady is right. The vast majority of the steel used in the Queen Elizabeth-class aircraft carriers was British, and more than half, by value, of the steel used in our Type 26s comes from the UK. Given the extra shipbuilding signalled via yesterday’s Command Paper, I am confident that there will be further opportunities for British steel in the years ahead.
Dame Diana Johnson (Kingston upon Hull North) (Lab) [V]
As we have heard, defence procurement must be about supporting our own strategically important defence manufacturing industry and protecting skilled jobs, as many countries do around the world. There can be no greater ambassadors for global Britain than our Red Arrows. Ministers have previously said that the current Red Arrows fleet of Hawk trainers, built at Brough just outside Hull in the 1970s, have an out-of-service date of 2030. Will we get a decision on the renewal of that fleet over the next few years?
Jeremy Quin
The right hon. Lady will be pleased to hear that the Red Arrows are safe, and the current out-of-service date remains 2030. I have no plans that I can currently share with her on what we will do in respect of an upgrade. That means not that one is not going to happen, but just that at the moment I do not have any plans and 2030 is a little distant. It is, though, something to which I will turn my mind.
Chris Loder (West Dorset) (Con)
I have been delighted to hear about planes and ships in the exchanges on the statement so far, but as the UK’s only end-to-end helicopter manufacturer is located on the border of West Dorset and South Somerset, I am keen to hear some good news about the rotary wing sector as well. The changing of some of the difficult and protracted MOD procurement processes offers a huge opportunity to make closer the relationship between the end users and our British inventors. I would be delighted to understand from the Minister whether that will be a factor in a lot of the initiatives and programmes that the Command Paper will bring forward.
Jeremy Quin
My hon. Friend and, indeed, my hon. Friend the Member for Yeovil (Mr Fysh) are both fantastic advocates for Leonardo and the capabilities that it represents across a wide range of defence areas, including the rotary wing sector. I have no doubt that Leonardo will be pleased about the announcement of our desire to procure more medium-lift helicopters, to come in the mid-2020s. I am sure people from Leonardo will be looking at that assiduously—if they are not, I think I am due to speak to them later today and will make certain that they are, but I suspect they are on it. We have a strategic partnership with Leonardo and I hope that it will study DSIS closely to work out how to work with us even more closely in the years ahead.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
The future surface combatant programme to replace Type 23 began in 1994. By 2005, it had evolved into the sustained surface combatant capability programme, which envisaged three classes of frigates. Since then, Governments have published the defence industry strategy for shipbuilding; agreed a 15-year terms-of-business agreement with BAE Systems in 2013; announced the Type 31 in the 2015 SDSR; and published the 2017 national shipbuilding strategy—remember that, Mr Speaker? Now, in 2021, the Government have unveiled their brand-new Type 32 and a return to the three-frigate escort fleet. What is the Department going to do to address the three lost decades of confusion in naval shipbuilding? Does the Minister think there are sites on these islands apart from the Clyde that could build the Type 32?
Jeremy Quin
There are shipyards throughout the United Kingdom that will look into this process to see how they can prosper, but I am acutely aware of the great skills that are exhibited on the Clyde and at Rosyth and of the fantastic job they are doing and have continued to do throughout covid. I am grateful for their continuous support throughout the process.
I am grateful also to the hon. Gentleman for talking us through the history of some of the decisions; he is right that a lot of them are protracted. I am proud to say, however, that with the plans we have unveiled, we will have seven classes of vessel produced in the UK for the first time since 1973, so that is another historic milestone. What we are setting out is a clear vision of how we will progress frigates, destroyers and other vessels such as the multi-role surveillance ship, and FSS. There is clearly a large pipeline of work for UK shipbuilders to focus on, to upskill for and to be sharpening their pencils for to ensure that they can engage with us properly.
Tom Tugendhat (Tonbridge and Malling) (Con)
I am delighted to see the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) wearing a Royal Engineers tie.
It is fantastic to hear this commitment to shipbuilding. In my experience in the MOD, the Navy would ask for five ships, centre would say, “Four should be enough. Here’s three, we’re going buy two and we’ll only service one.” Very quickly, we would be reduced to less than had been promised in the initial strategy. With the pivot to Asia we have been promised and the commitment to base out of Singapore, can my hon. Friend assure me that not only will we have the purchasing capability, but we will have the servicing capability that makes such a difference to the actual deployment of ships? As we know, we have had too many tied up for too long, when we need them to be out doing exactly what we pay them for.
Jeremy Quin
Yes, I can absolutely assure my hon. Friend on that point. I admire his maths, as well his attention to detail in respect of the hon. Gentleman’s sapper tie.
I assure my hon. Friend that we are absolutely on it. We need to maintain the availability of our fleet. We are not about saying, “We’ve got X number of ships. Isn’t that great?” when they are all tied up in Portsmouth. There is no point in that. We need our fleet to be present, to be persistent and to be forward looking, and that is exactly what we are going to be focusing on. This might be stretching his question too far, but let me say that the same also applies to our land industrial strategy, which I am proud to have announced today as part of this process.
Chris Bryant (Rhondda) (Lab) [V]
The MOD has a mixed record on procurement investment in south Wales. On the one hand, there is a long-standing commitment to General Dynamics, but the MOD cancelled the defence academy in St Athan and, only a couple of years ago, preposterously sold the Maindy barracks in the Rhondda, thereby denying the Sea Cadets the possibility of having a new home locally. There are small investments in companies such as MFC International in Tonypandy, but may I ask the Minister to do two things? First, will he make sure that small companies have a real chance of big contracts with the MOD? Secondly, will he please buy the Sea Cadets in the Rhondda a new home?
Jeremy Quin
I cannot promise the hon. Gentleman a new home for the Sea Cadets, but I take what he says very seriously. As a result of his question, I will look into the matter and find out where we are. The cadets have an important role to play around the country and they should be properly housed, but I cannot answer with any more precision than that.
More broadly, the hon. Gentleman recognises the value to south Wales of the Ajax contract. It is an incredibly impressive, fully digitalised vehicle. He is right, though, that often in defence, the real value is found with SMEs. As I said, over 19% of our equipment and support spending goes to SMEs now. We will have a refreshed SME action plan published later this year, and it will include issues already raised as part of this thesis—for example, the defence technology exploitation plan, which has worked well in Northern Ireland, will be put out right across the Union. There are measures in the strategy to support smaller companies, and I want smaller companies, which are often the most innovative and inspiring in our country, to have the opportunity to win larger contracts. I thank him for his question.
James Gray
Thank you, Madam Deputy Speaker. May I first call attention to my entry in the Register of Members’ Financial Interests and my involvement in the all-party parliamentary group for the armed forces and the Armed Forces Parliamentary Trust, both of which I chair and both of which are supported by the major UK defence companies? They are among the greatest defence manufacturers in the world, and I salute them for it.
Will the Minister acknowledge two other groups whose contribution we nurture? First, he mentioned small and medium-sized enterprises several times. I welcome the fact that there will be a refresher on the action plan produced during this year. When he does produce that refresher, will he please do two things? First, will he increase the number of direct contracts between the Ministry of Defence and the SMEs? Otherwise those SMEs risk being squeezed out by the original equipment manufacturers.
Secondly, will the Minister strengthen the contractual obligations on OEMs to use British SMEs? I understand his concerns about sovereign capability and I very much welcome his commitment to use British manufacturers as much as he possibly can in the future, but will he also recognise and support the very many companies that are overseas in ownership, but that make a huge contribution to our defence? Boeing, Raytheon and Elbit all spring to mind, and Leonardo has already been mentioned. They employ large numbers of people and make a huge contribution to our defence overseas, even if they are actually owned by overseas companies.
Jeremy Quin
On OEMs, my hon. Friend is absolutely right to draw attention to the fine international companies that choose to base themselves here. They make a real contribution to our economy and to our defence sector in the UK. We will continue to be uniquely open to the companies of friends and allies overseas choosing to locate, build and manufacture here in the UK, as well as to apply research and technology and development, and I absolutely thank them for it. He mentioned Boeing. That is one example of a company that has been assiduous in making opportunities available to UK SMEs. It sees it as a great way of tapping into more skills and increasing its resilience. I welcome what it and many others do in terms of making certain that there are opportunities for UK smaller companies as part of their supply chain.
There are two things that we can do. The first is that we will see an increase in direct company awards to smaller companies, but that is because of the nature of how defence is changing. As we become more digital, more cyber, there are many smaller companies that can produce the goods in these areas and it becomes a less capital-intensive business. The second thing is that, through the social value part of the tender process, we will be able to be more descriptive as to what we are expecting to see from companies. In that respect, I very much welcome the fact that, on Boxer, we expect to see 60% of all that supply chain flowing through from UK companies.
Andrew Gwynne (Denton and Reddish) (Lab) [V]
I am fully supportive of having smarter procurement to support British industry and home-grown jobs, but given that Serco has ripped off the Ministry of Justice, failed on test and trace, and, in the defence sector, also failed on the Atomic Weapons Establishment, what assurances can the Minister give the House that our sensitive defence infrastructure will be protected from it in the coming years?
Jeremy Quin
I should just be clear that we look at every tender on a case-by-case basis, and we look at each company and each competitive situation on a straightforward tender-by-tender basis. I will not go into the details of what the hon. Gentleman stated.
Dr Julian Lewis (New Forest East) (Con)
I am sure that the Minister knows that friends of defence on both sides of the House wish to campaign for the 3% of GDP, as recommended by successive Defence Committees, to be spent on defence, but to do that, we need accurate figures. Does the Minister accept that the black hole in the defence budget was correctly described as £17 billion? How much of that £17 billion would be met by cuts and cancellations? How much would be topped up by money from the extra £24 billion, and, at the end of the process, how much of the extra £24 billion will be left for new projects?
Jeremy Quin
It is interesting to hear that there are colleagues in the House wishing to campaign for 3% of GDP to be spent on defence.
Jeremy Quin
My right hon. Friend says that to a Minister for Defence Procurement who is interested to hear it. I think we have a good settlement this time round. I am sure that he welcomes the extra £24 billion and regards it as a very good step forward for the defence of our country.
I do not recognise the £17 billion number, but there was a black hole—of that there is no doubt; we said that the equipment plan was not affordable. We recognise that there will be programmes as part of the equipment plan that we want to take forward, so within the £24 billion there will be programmes that we were hoping to finance but did not have the money for, including the Type 26s and the Type 31s. The equipment plan will be published in due course, and my right hon. Friend will be able to get all the details he wishes, and more, from that.
Nick Smith (Blaenau Gwent) (Lab)
On exercise last year, our Queen Elizabeth aircraft carrier was heavily reliant on Marine Corps F-35 planes. It is great that our allies helped out then. However, given the small number of UK F-35s that have been programmed, does the Minister accept that if both our carriers are deployed at the same time, we will be heavily reliant on US planes in the future?
Jeremy Quin
To say “helped out” is a little ungenerous. I think the Marine Corps genuinely enjoy working with the Royal Navy, as the hon. Gentleman acknowledges, and we have a very close working relationship with them. We have committed to 48 F-35s, which will arrive by 2025. We have not announced how many, but we will be buying more F-35s. We will take that decision by 2025, when the full complement of 48 have arrived.
Holly Mumby-Croft (Scunthorpe) (Con) [V]
I welcome this strategy, along with the Defence Command Paper. The Minister will know that world-class steel made in Scunthorpe was used to build the hull of HMS Queen Elizabeth. Will he do all he can to ensure that UK-made steel continues to be used wherever possible in defence contracts?
Jeremy Quin
My hon. Friend is right that the vast majority of steel on the Queen Elizabeth was from UK sources. I am delighted at the role that Scunthorpe played in that, and I hope that there will be many more opportunities in the future. The shipbuilding programme we are setting out obviously produces opportunities for UK steel manufacturers. We will make certain that our pipeline is made freely available, and I sincerely hope that there are plenty of opportunities that will be exploited.
John Redwood (Wokingham) (Con) [V]
I strongly welcome the emphasis of the statement on making more in Britain, because we cannot be properly defended if we rely on imports for crucial things. Is the UK undertaking a full audit of the designs, intellectual property and rare materials we would need to manufacture all our crucial defence equipment here, were we to face a blockade or other hostile action against our imports? President Biden is currently carrying out such a supply chain analysis for his country.
Jeremy Quin
As my right hon. Friend will know, the supply chains in defence are vast, but it is an analysis that we are undertaking. We are doing it project by project, making certain that the most crucial are investigated first, but we are doing an analysis of our supply chains, and that is being elevated to the Defence Board, to make certain that we have greater oversight of what goes into our crucial defence kit and equipment.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP) [V]
The Government are procuring 80 additional warheads for Trident to stockpile in Scotland, each more than eight times more powerful than the bomb dropped on Hiroshima. The Minister must know that by increasing these weapons of mass destruction, his Government are pushing at a new nuclear arms race and ending 30 years of gradual nuclear disarmament. Is that what global Britain is all about?
Jeremy Quin
Global Britain is about many things, and one of those is helping to defend ourselves, our values, our freedoms and our allies. Part of that, as this Parliament has agreed, should be maintaining an independent nuclear deterrent that is credible and minimal. Of all the declared nuclear states, we have only one delivery mechanism for nuclear weapons, and we maintain a minimum credible deterrent. In order to do that, we have had to raise the ceiling of the total number of warheads we are prepared to have.
Philip Dunne (Ludlow) (Con) [V]
I very much welcome the focus of this DSIS on recognising the role that defence can play in contributing to UK prosperity. The Minister has highlighted several issues that I felt needed to change in defence procurement in my review, which was published nearly three years ago. I am grateful for his comments about it. In this statement, he has demonstrated a deep grasp of his brief, on which I congratulate him.
Key to gaining public and cross-governmental support for increasing defence expenditure is measuring the impact of that spend on the economy, especially the regional impact in helping to level up Britain. That requires a good handle on data, which is why I recommended establishing defence economics as a valuable tool for the MOD, Defence Equipment and Support, and the defence industry, to help to assess the merits of competing investment proposals when allocating spend. Will my hon. Friend update the House on the role of the joint economic data hub in delivering that information, its security for the long term, and the role that it can play in the UK Defence Solutions Centre and the Defence Growth Partnership, of which I should remind the House I am deputy chairman?
Jeremy Quin
I am grateful that my right hon. Friend has been called as the final Member to ask a question, if that is still the case, on the statement. It is appropriate that he should be. In my first week in this role, I spoke at the defence economics conference, and he presented me with a copy of his paper, which has been incredibly helpful for me, as it has been for the MOD, not only in introducing the defence prosperity programme in March 2019 but in laying some of the groundwork for the DSIS today. I am sure that as he reads it he will recognise a lot of the themes that emerge.
Part of that is, indeed, the role of the joint economic data hub, which has already reached its initial operating capacity, and it is conducting a full survey of defence employment. It will reach full operating capability by the end of the year. In doing so, it feeds into our analysis critical information about jobs, regional growth, prosperity and future development. It is really important, and it lies at the heart of what we are doing with DSIS—growing the prosperity of our United Kingdom while at the same time ensuring that we have the kit and equipment that our people need. I thank my right hon. Friend for the work that he has conducted, which he continues to conduct, in defence. It was a valuable contribution, and it will help us to make certain that DSIS is the great success that it deserves to be in supporting our brilliant defence manufacturers and armed forces.