Defence Contracts: British Steel

Earl Howe Excerpts

Monday 21st November 2016 Lords Chamber

[Lord Hoyle]

To ask Her Majesty’s Government whether they are planning to require all future British defence contracts to specify the use of British steel exclusively.

[The Minister of State, Ministry of Defence (Earl Howe) (Con)]

My Lords, this Government are committed to supporting the British steel industry and we are addressing any barriers that prevent UK steel producers competing effectively in the open market. Defence steel requirements continue to be sourced by our prime contractors from a range of UK and international suppliers. This reflects the need to source specific grades of steel, not all of which are available in the UK, and ensures competitive cost, time and quality.

[Lord Hoyle (Lab)]

However, it is not only on the replacement for the Trident submarine that foreign steel is being used but on the Royal Navy patrol vessels, for which 60% of the steel comes from Sweden. Will the Minister not apply Article 346, which will ensure some relief to our beleaguered steel industry and provide some job security for the hard-working, highly skilled steel employees?

[Earl Howe]

My Lords, along with the rest of the Government, the MoD is fully committed to supporting the British steel industry. Most defence steel requirements are sourced by our prime contractors; in fact, the British steel industry has proved very successful in those competitions. We are taking specific action across government. We are compensating energy-intensive manufacturers such as steel for the costs associated with renewables and climate change policy, worth £126 million to them. We secured flexibility over EU emissions regulations. We have made sure that social and economic factors can be taken into account when the Government procure steel. We have also successfully pressed for the introduction of trade defence instruments to protect UK steel producers from unfair steel dumping. There is a range of measures that we believe will help our industry compete even more effectively.

[Lord Brookman (Lab)]

My Lords, I am rather surprised by the Minister’s response to the question posed by my noble friend Lord Hoyle. It is a serious situation; it is not as simple as the Minister describes. Only last week, or the week before, the general secretary of Community, which used to be the Iron and Steel Trades Confederation—a union of which I was a fully paid-up member and still am—wrote to the Prime Minister spelling out in some detail the problems that workers in Port Talbot and elsewhere across the country face. It is not an issue simply of whether the Government are dealing with the British steel industry fairly and properly; consideration needs to be given to making sure that for all the jobs that require steel—construction of the third runway, the Nissan car plant in Sunderland and elsewhere—the necessary support from the British Government is copper-bottom guaranteed.

[Earl Howe]

My Lords, the noble Lord is right: we have to acknowledge that the steel industry is currently dealing with very challenging global economic conditions. It is a global problem that I would maintain requires a global solution. We set up the Steel Council to work with all key stakeholders to explore actions that industry and government can take further to support the UK steel sector, but our aim is to leave no stone unturned. We have been addressing the asks of industry as I outlined in my earlier reply.

[Baroness Jolly (LD)]

My Lords, this is an issue of value for British taxpayers’ money and of our own industrial capability and capacity. What proportion of defence contracts is expected to be delivered by British suppliers and contractors? Are there any restrictions on using suppliers that are not British?

[Earl Howe]

My Lords, we have a policy to build our warships in British yards. Defence requirements for steel in that context are usually sourced by our prime contractors, taking into account—as the noble Baroness rightly said—value for money, quality and the time factor. We remain engaged with our prime contractors to ensure their support in implementing our policy guidance on steel procurement. That emphasises the importance of pre-market engagement activities to facilitate access to supply-chain opportunities for UK suppliers.

[Lord West of Spithead (Lab)]

My Lords, at the risk of a cull on admirals, surely a good way forward would be to order more ships; you would then need more steel. Will the noble Earl confirm that the new solid support ships to be built will use British steel and not be built somewhere abroad? If they are built here with British steel, that helps British shipbuilding and our steel industry, which is a strategic necessity for a nation such as ours, the fifth richest in the world. We need that capability in our country.

[Earl Howe]

My Lords, the ambition of Sir John Parker in his national shipbuilding strategy is for UK shipyards to be in an excellent position to compete internationally for procurement opportunities such as the fleet solid support ships. The emerging principles of the strategy should be applicable to those ships without the need to restrict procurement to the UK.

[Lord Touhig (Lab)]

My Lords, earlier this year the Government issued new policy guidelines to ensure that UK steel suppliers compete on a level playing field with international suppliers. They said that this would feed into our national shipbuilding strategy and that the Government regarded British steel manufacturing as vital to this programme. On 4 November, when the Defence Secretary announced plans to cut steel for the first batch of the new Type 26 ships, he was unable to confirm that British steel will be used. Can the Minister be clearer: will British steel be used? Can he list the British steel suppliers that won contracts to supply steel for the building of Royal Navy ships as a result of the policy announced earlier this year?

[Earl Howe]

My Lords, no steel has yet been produced for the Type 26 programme. UK steel suppliers will have an opportunity to bid for the work as part of an open competition. I believe that the Type 26 programme will secure hundreds of high-skilled shipbuilding jobs on the Clyde. In a wider context, it is worth noting that UK suppliers made a significant contribution to the supply of steel for our major defence programmes. The classic example of that is the Queen Elizabeth aircraft carriers, for which some 95,000 tonnes of steel used was British—88% of the content.