UK Sovereign Capability

Carol Monaghan Excerpts

Tuesday 20th November 2018 Westminster Hall

[Mr Sweeney]

The right hon. Gentleman makes a very important point. Britain became a pre-eminent naval power because its industry was pre-eminent and because it was an innovator. That is what we need to get back to. The national shipbuilding strategy is trying to achieve that, but it falls short on how it will deliver it, because it militates against the very objectives it is trying to achieve. Industry needs certainty of capacity, so that it can invest with a degree of vigour in shipbuilding.

I talked about HMS Lancaster and the launch of the Type 23 frigate, which was my first ship launch, as a babe in arms, at Yarrow’s in Scotstoun. Sir Bob Easton was chairman of Yarrow’s at that time and made it quite clear that the Type 23 frigate was being bid in batches of three. It was Swan Hunter versus Yarrow. In 1990, Bob Easton said, “I am currently employing 2,500 people in my shipyard. I can employ them until the end of 1991. If I don’t get an order next year, I am making 1,000 of those people redundant, and that is the stark reality of what I am facing. It is not just about the jobs. I would like to invest in a new covered shipbuilding facility. I would like to invest in modernised plant machinery, but the business case does not stack up, unless I know for sure that I am going to be building all of those Type 23 frigates.”

The same issue is playing out today. The national shipbuilding strategy harks back to the same mentality, driving the same behaviours. Whether it is Cammell Laird or BAE Systems, they will not be able to say that they have a prescription for a world-class frigate factory, as it was dubbed, or a modern dock hall covered facility. They will not be able to make that business case stack up. They will not be able to put their shareholders’ money into that and to finance it, unless there is the certainty on the horizon that they will be building the entire programme, and unless there is legal certainty that that will happen. Without that certainty, companies cannnot make the investment and we therefore cannot get the operational efficiencies that deliver the savings and the cost reductions that would enable the Royal Navy, ultimately, to build a larger fleet. That is the virtuous cycle that we ought to be striving towards. Unfortunately, the strategy document undermines it.

When it comes to Type 31, the same point is still an excellent one. By bidding it in blocks and spreading it around the country, we lose the critical mass and do not get the certainty that would allow a shipyard such as Cammell Laird’s to invest in building a production line of Type 31 frigates, in parallel with a production line of Type 26 frigates. Ultimately, we want to get to exactly what the Americans do. They have been building Arleigh Burke cruisers since the 1980s; they have built the exact same ship in a consistent way for the last 30 years or more.

[Carol Monaghan (Glasgow North West) (SNP)]

The hon. Gentleman is making a very good point. Does he agree that we were promised 13 frigates in 2014, not eight plus five general purpose ships? The shipyard workers in both Scotstoun and Govan have been hugely let down by those broken promises.

[Mr Sweeney]

I thank the hon. Lady for Glasgow—

[Carol Monaghan]

North West.

[Mr Sweeney]

Glasgow North West. It was much better when we had the proper place names for constituencies.

[Carol Monaghan]

Anniesland.

[Mr Sweeney]

Yes, Anniesland. I was one of those shipyard workers at the time. I agree that certain understandings were given about investment. Indeed, the bulk of Scotstoun shipyard was demolished on the premise that it was going to be rebuilt as a new modern dock hall. I was personally involved in the project to design it; my personal investment in that project is second to none. However, it has to be recognised that the Clyde has certainty to the 2030s, although we need to go further in making the most of the opportunity we have.

I understand from the MOD that its ultimate aspiration would be to build Type 26 frigates in perpetuity if it could—if it had that certainty of financing and planning. Then we could be certain that the Clyde would always be the centre of production for those larger frigates. That would mean that other yards around the UK, such as Birkenhead, could focus on smaller projects, such as the Type 31, which could form a critical mass of a learning curve and a productivity enhancement, and secure the investment that would make it excellent at building those ships and more likely to win overseas orders as a result.

--- Later in debate ---

[Carol Monaghan (Glasgow North West) (SNP)]

I congratulate the hon. Member for Glasgow North East (Mr Sweeney) on securing this debate. If the UK aspires to be strong, global and influential, as the 2015 national security strategy announced, it needs access to a capable and resilient supply chain for its armed forces. The hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) talked about the provocations of certain nations, and we must be alert to the threats they pose.

Defence spending should not exist in a silo. Defence contracts have a series of economic consequences, the most obvious of which is the tax revenues that are generated. It is disappointing that, until now, the Government seem reluctant to take account of that. They receive an estimated 37% of the money spent on contracts in tax revenues, and that is not taking into account the multiplier effect of employees’ spending. That raises a question about their definition of value for money. When bids are considered in the future, we must take into account their impact on tax revenue and employment.

The ability to develop and maintain equipment depends on a rich research landscape and a skilled workforce, so it is critical that there is a commitment to increase science and technology funding, especially in the pure research phases of the development cycle. Most hardware requires after-sales service. We saw that in the equipment plan, which shows that in 2018-19 the MOD spent about £7.8 billion on new equipment and nearly £8.1 billion on support.

Once the capability to develop and produce complex systems has been given up, rebuilding it is difficult, time-consuming and risky. The hon. Member for Glasgow North East raised the issues with the Astute submarine programme. The excessive running-down of the Barrow workforce after the completion of the Trident programme is a classic illustration of that. As the hon. Member for Plymouth, Sutton and Devonport said, those workers are highly skilled and sought-after. There are plenty of industries ready to snap them up if our defence industry does not have opportunities for them.

We must be able to operate independently, so our capability should not be linked to the foreign policy of a supplier, as the right hon. Member for North Durham (Mr Jones) said. There are no guarantees that the UK will only ever conduct military operations that the US recognises and supports. We may have to—or wish to—operate independently.

The contracts for the fleet solid support ships have been problematic for a long time. The idea of putting them out to international competition is short-sighted and reflects our siloed thinking. We know that other Governments subsidise their shipbuilding industries, thus allowing bids to appear competitive, and effectively buying industrial contracts. I wrote to the Minister’s predecessor earlier this year about that. He responded:

“We are confident in the measures we have in place to ensure the integrity of the FSS procurement process, including measures to ensure it is conducted strictly in accordance with the EU rules on state aid. Although these rules do not apply to non-EU companies, the MOD will make no such distinction in their application and all bids will be judged against the same standards.”

I would like some assurance from the Minister that those measures are still in place.

Many nations have shipbuilding capability, including many small nations. Denmark has been able to build all nine of its frigates, three arctic patrol vessels and seven large patrol craft, all in Danish shipyards. The Norwegian navy’s fleet is built in Norwegian yards. We must have the ambition—beyond 2030—to build not just our frigates and warships but our fleet support ships in yards here in the UK.