National Shipbuilding Strategy

Baroness Smith of Newnham Excerpts

Tuesday 15th March 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, the latest iteration of the Government’s shipbuilding strategy is overdue. Funding contained in it was first announced two years ago. However, it is welcome, and I am grateful to the Minister for coming to the House this evening to answer our questions.

The Defence Select Committee’s report last December highlighted how stretched the Navy’s capabilities are, with a danger that it will not be able to cope with the increasingly complex international security environment. It warns that an unexpected crisis could break it. It is vital that the Government do what is needed to avoid that dire outcome. The report urges collaboration with the UK shipbuilding sector by providing an assured pipeline of work and actively intervening to support the modernisation of yards to support the delivery of new vessels into an expanded fleet capable of fulfilling the ambition of the integrated review.

However, the strategy does not confirm the total number of ships the Royal Navy will receive. Can the Minister confirm today how many Type-32 frigates and multi-role support ships will be built and delivered? Does the “more than £4 billion” of government investment over the next three years cover any of the cost of the 150 ships in the 30-year pipeline to which the Statement refers? How much of this is new money?

Beyond this, there are two major problems with the strategy. First, why does the strategy not promise a British-built by default approach to procurement? This, as the GMB and Unite have highlighted, will kill investment and put UK jobs and skills at risk. A commitment to ensure that ships are built in UK yards, with targets for using UK steel, would build resilience in our supply chains and protect our security.

Steelmaking is a crucial component of our national security and our ability to act in our own interest. What steps will the Government take to improve the public procurement of UK-made steel in shipbuilding in order to preserve and promote jobs that are of vital importance to steel communities and the UK’s strategic independence? What is more, with foreign bidders supported by their own Governments, British shipyards are not even able to compete on a level playing field. None of this feels in line with the Government’s levelling-up strategy.

We know that a British-built by default strategy would create more jobs, but frankly, we do not know how many new jobs there will be a result of the strategy as it is. Can the Minister tell us? The Government seem to keep updating their excuses as to why we continue to procure from elsewhere, such as with a £10 million contract awarded to a Dutch yard last week. No other shipbuilding nation would act in this way. What the Defence Secretary has said is that fleet solid support vessels will be built by “British-led teams” following the decision to award the competitive procurement phase design contracts earlier this year. How is “British-led” defined? What percentage of the construction and manufacture of fleet solid support vessels will take place in British shipyards?

Secondly, the strategy does not tackle long-lasting issues of mismanagement and delivery at the Ministry of Defence. As it stands, no major shipbuilding programmes are rated on time or on budget by the National Audit Office. The number of projects rated amber or red is increasing. We know from previous experience how easy it is to underestimate both the resources and time needed for large contracts to be delivered. Can the Minister tell us what specific initiatives will be put in place to achieve on-time and on-budget outcomes? Moreover, while on the subject of contracts, I am curious about the minimum 20% weighting for social value that the strategy says will be applied for MoD shipbuilding competition. Can the Minister explain what this means in more detail? How will social value be assessed?

On a wider point, the strategy assumes a level of investment from the private sector into research, development and manufacturing. The mood seems to be that a forward-looking strategy providing a glimpse of the future to the sector will be enough to generate investment. I find this optimistic. Can the Government confirm their belief that the private sector will invest at the levels necessary without direct funding from Government? As I mentioned earlier, not having a British-built by default strategy makes this optimism even more farfetched. Is the Minister not concerned?

Those are my two main areas of concern, but I have some further questions on other aspects of the strategy. The strategy establishes the Maritime Capability Campaign Office within the Department for International Trade as the export arm of the National Shipbuilding Office. This will supposedly turbocharge UK shipping exports. Given that this has such a prominent role in the strategy, it is neither unexpected or unwelcome, but without a commitment to using UK materials and shipyards, it seems hollow. Can the Minister therefore indicate what role she expects exports to have in maintaining our shipbuilding industry? Without a commitment to using British materials, does she see the UK as simply a processing centre, to import materials from abroad and sell them on as finished vessels; or perhaps the idea is to contract foreign shipyards and then sell their finished products elsewhere, with the UK acting only as an intermediary?

Finally, with the Spring Statement now only eight days away, can the Minister confirm a big boost for defence funding, both to fulfil the ambition of the integrated review and to respond to the growing threat of Russian aggression?

[Baroness Smith of Newnham (LD)]

My Lords, I agree with many of the comments and questions from the noble Lord, Lord Tunnicliffe. It is obviously welcome to have this refreshed National Shipbuilding Strategy, but one might wonder what has happened to the ships.

We recently looked at the Type 45s. Before we get to the actual shipbuilding, ship maintenance and repair perhaps need to be thought about, so I have one very direct question for the Minister. How many of our Type 45s are currently at sea? How many are in dock? How many are seaworthy? It is surely important for the UK’s position in the world that we have ships available now, not in many years’ time.

In particular, I wonder whether this shipbuilding strategy is as ambitious as it needs to be. The Statement says:

“We have committed to procuring a formidable future fleet including up to five Type 32 frigates”—


as the noble Lord, Lord Tunnicliffe, asked, how many are envisaged?—

“alongside the Type 31 and Type 26 programmes. We will be growing our fleet of frigates and destroyers over the current number of 19 by the end of the decade.”—[Official Report, Commons, 10/3/22; col. 505.]

What does that actually mean? Will we have 20 ships by the end of the decade—an additional one? What sort of message do the Government think that sends to the international community? The Prime Minister currently says that he will lead activity against Russia. If we have only 20 ships by 2029—or does that mean 2030?—I am not sure that is terribly credible.

We have a quotation in the strategy from the Prime Minister:

“If there was one policy which strengthens the UK in every possible sense, it is building more ships for the Royal Navy.”


That is clearly welcome—as would be increasing the number of our troops—but, realistically, what are the projections for the size of the Royal Navy? How far do the Government plan for these to be British-made ships with British steel? How far do they really think any defence expenditure settlements will enable us to deliver on time? As the noble Lord, Lord Tunnicliffe, pointed out, it is very rare for defence procurement to arrive on time and on budget. With the current rates of inflation, given that defence inflation normally rises much faster than ordinary inflation, what is the realistic prospect of our increasing the number of ships and doing so on time?

[The Minister of State, Ministry of Defence (Baroness Goldie) (Con)]

My Lords, I first thank the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Smith, for their observations. Although their questions, quite rightly, are penetrating, I think there is an understanding that this is an exciting document. It is not empty, vacuous flim-flam, but a very serious, holistic approach to how within the United Kingdom we sustain and grow a prosperous indigenous shipbuilding industry. I remember that one of the first tasks I had as a Defence Minister, back in 2019, was to present to your Lordships the review by Sir John Parker of the 2017 shipbuilding strategy. I remember thinking at the time that the review document was exciting and visionary.

Coming from Glasgow—or coming from Renfrewshire, near Glasgow—and having personally visited Upper Clyde shipbuilding yards when they were on the brink, I do wish to pay tribute to the trade union movement operational at the time for its assiduous work in making sure that politicians understood what the threats and challenges were. They were well informed and persuasive and I thought they did a splendid job in persuading the political process that, back then in the early 2000s, we had to make a better job of how we approached shipbuilding. I know noble Lords will remember Kvaerner on the Clyde, which was completing one order when there was no certainty about where the rest of the work was coming from. As I say, I pay tribute to the trade union movement for its determined and resolute work to try to get greater sense to prevail.

That is why, stepping forward to what Sir John Parker did in 2019, I drew a deep breath of fresh air and thought that this was really going somewhere. I have to say to your Lordships that I think this shipbuilding strategy really does pick up the baton and run with it. What I see in here are the components for a serious, well-funded, well-researched, well-supported, buoyant, competitive shipbuilding industry within the UK, and we should all be heartened and encouraged by that.

The noble Lord, Lord Tunnicliffe, echoed by the noble Baroness, Lady Smith, asked about the size of the Navy. As they are both aware, there are good things happening. For the first time in 30 years, unbelievably, we have two different types of frigate being built simultaneously. We are satisfied that the number of Royal Navy frigates will be sufficient, and we do not anticipate that number dropping below 10 this decade. That is because, in addition to the Type 23s currently serving, we will have the first Type 26s coming in, and we will start to see the Type 31s being delivered, which will all be delivered by 2028. I would observe to your Lordships that the level of shipbuilding investment by the MoD is hugely significant and puts flesh on the bones of this strategy. MoD shipbuilding will double over the life of this Parliament and rise to over £1.7 billion a year. That will certainly allow us to increase the number of frigates and destroyers beyond the 19 we currently have by the end of the decade.

The noble Lord, Lord Tunnicliffe, asked specifically about the Type 32. That is an exciting project. It is at the moment still at the concept stage, but it will be the first of a new generation of warships, with a focus on hosting and operating autonomous offboard systems. So that is a really innovatory, visionary concept. The early preconcept phase has commenced; the focus is now on developing the operational concept, and the procurement programme strategy will be decided following the concept phase, which has not yet been launched. I can confirm these ships will be UK-built, with the exact shipyard, obviously, still to be determined—that will be subject to commercial competition.

The noble Lord, Lord Tunnicliffe, also asked about the Fleet Solid Support. It is an interesting concept. It will be either a sole British build or a consortium, but the predominant interest will be British. The noble Lord asked how that fitted in with levelling up and the union. I would say to the noble Lord that I was very interested to see the graphic depiction of the map in the document itself, because it gave one of the most visual confirmations of just how critical, right across the United Kingdom, shipbuilding is. It is not just the yards building the ships; it is the huge number of small and medium-sized enterprises that are in the supply chain for that activity. All that plays its role in levelling up and in adding value to communities, which can all expect benefit from the fruits of this strategy rolling out.

The noble Lord, Lord Tunnicliffe, asked about the role that the private sector will play. As he will be aware from the strategy, there has been close consultation with the industry, as is absolutely right. We will establish a shipbuilding enterprise for growth, which will be an industry-based organisation, and we will learn from similar approaches taken in sectors such as the automotive, aerospace and space industries how to take that forward. The private sector has an important role to play in this but, as I say, it has been engaged throughout the refresh of the National Shipbuilding Strategy and is absolutely engaged on the vision contained in it.

It is also interesting to look at the definition of “shipbuilding enterprise” because it gives a good encapsulation of what we are talking about. For the purposes of the refresh:

“The term includes the design; build; integration; test and evaluation; repair; refit; conversion; and support of warships; commercial vessels; workboats; leisure vessels; systems and sub-systems.”


That is a huge range of activity, which, as I said earlier, reaches out right across the United Kingdom.

The noble Lord, Lord Tunnicliffe, asked about exports, which are an important component. As he is aware, in relation to the Type 26, we have had an export of design to Canada and Australia. It is important to acknowledge that this is an important departure from the old concept, where you designed a ship and built it so it was solely British and everything remained in the control of the British shipbuilder. The shipbuilding industry has recognised—Sir John Parker identified this back in 2019—that to have resilience and appeal to all sorts of markets, whether they are indigenous markets here or export markets abroad, we need to be able to create things that other people have an interest in acquiring. That is a really exciting development.

The Type 31 has already seen export success, with the announcement in September last year that Indonesia has selected the Arrowhead 140 design for its programme. The UK Government are working closely with Babcock on a number of other export opportunities for the Arrowhead 140; of course, the results of the Miecznik frigate programme in Poland were recently announced, so there is activity there. It is an exciting reflection of what shipbuilding is currently achieving and what the strategy recognises and can build on.

I referred to the defence funding settlement. Both the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Smith, were interested in what lies ahead for defence. We have had the integrated review, the defence Command Paper and what most people regard as a very significant financial settlement for defence. We take nothing for granted. We live in the business of identifying and addressing threat. We have a very engaged Secretary of State who will, I am sure, be alert to how we do that and ensure that the funding is appropriate to whatever we need to deploy to address threat in future.

The noble Baroness, Lady Smith, asked whether the strategy is ambitious. Again, I was struck by a section in the document on our ambitions for the shipbuilding sector. I will not read it all out but, when I read through it, I felt as though I had had a good glass of gin—I felt uplifted. Look at the headings: “green technology”; “productivity”; “skills”; “autonomy” —developing a domestic regulatory framework for maritime autonomy so that we can lead the way on international maritime organisation—and “exports”. There are a lot of ambitions in here. Perhaps the more pertinent question is: how do we know that we are achieving them? Again, I will not bore your Lordships with the detail but there is a series of metrics which would be a useful device in measuring how we are getting on.

The noble Baroness asked particularly about Type 45s. The power improvement project has been applied to HMS “Dauntless”. She has moved into the test and commissioning phase of her programme. All three new diesel generators have been run. Initial load trials have been completed successfully, and that is a precursor to the rigorous trials programme in harbour before returning to sea later this year for sea trials.

HMS “Daring” has moved to Cammell Laird. It arrived there in September in readiness for commencement of her PIP conversion, which will be carried out during this year. This is a process whereby, as each ship is done, we learn. The other Type 45s will come in depending on operational activities and commitments. They are hugely capable, much-admired ships and are regarded as significant members of the Royal Navy fleet. I think that is a positive picture, and I am satisfied that there will be a good story to tell.

I hope that I have answered all the questions that the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Smith, raised.