Defence Spending (Wales)

Guto Bebb Excerpts

Wednesday 8th December 2010 Westminster Hall

[Chris Evans (Islwyn) (Lab/Co-op)]

I congratulate my hon. Friend the Member for Swansea East (Mrs James) on securing the debate. Even in a debate about defence spending, we cannot talk about defence without paying tribute to our brave men and women fighting overseas. I stood, like many other hon. Members, at cenotaphs in St Fagans, Pontllanfraith and Cefn Fforest in my constituency, and Maes-y-cymer, where we paid tribute to our war dead. We should always keep them in mind when we talk about defence.

I want to focus on the effect of defence spending on the wider economy. The defence footprint in Wales is massive and hugely underestimated. I often liken it to the car industry. There is no Welsh car but our supply chain, which manufactures components for cars, has a massive effect on the car industry. About 2,300 people work in defence in Wales; £250 million is spent by the Ministry of Defence with firms in Wales. My hon. Friends the Member for Swansea East (Mrs James) and the Member for Ynys Môn (Albert Owen) discussed St Athan, the training college, and made an important point about RAF Valley. A delay in one thing has a knock-on effect on the economy. With the promise of an MOD contract, firms ask to borrow money from banks. The bank manager will ask when the contract is arriving. They wait and wait, but still nothing. What happens is that the firm goes to the wall, the contract is eventually awarded by the Government, but there is no firm to produce the components needed.

That strikes at the heart of the problem with this Government at the moment: a real lack of understanding of economics. The idea that the public sector and the private sector should be separate is absolutely wrong, and if anywhere that can be shown to be the case, it is in the defence industry. Ian Godden, the chairman of ADS, the British aerospace and defence industry body, has warned that the British defence industry will halve in size from 10% to 5% of the UK’s manufacturing output. The main customer for the defence industry is the Government, who have the power to shrink or grow the sector. Unfortunately, they have made the decision to shrink it. It is not about cutting an aircraft carrier or a tanker; it is about cutting investment for the future. That is the problem with defence cuts.

[Guto Bebb (Aberconwy) (Con)]

The hon. Gentleman appears to be making the case for defence spending to be used as an economic development tool, which contradicts the comments made about the need for a strategic defence view of the world. In the context of arguing for defence spending as an economic development tool, can he justify why for the past five years—between 2003-04 and 2007-08—defence spending in Wales was less than 1% of the total under the Labour Government?

[Chris Evans]

I will come to that point when I discuss General Dynamics in my constituency.

This is about the knock-on effect on the economy. If a major defence contractor comes to a constituency—as we have been lucky enough to experience in Islwyn with General Dynamics UK—the knock-on effect is amazing. GDUK came to Islwyn, because Government encouraged it to invest in the community, and we are glad that it is there. If we look at the knock-on effect, a ground-breaking innovation centre—the EDGE facility at Newbridge—has been set up to enable small and medium-sized enterprises to transform innovative ideas into products fit for market. The centre acts as a springboard for new IP—intellectual property—providing a collaborative environment where the MOD, Britain’s leading universities and high-tech SMEs are able to conduct rapid testing of new advances in technology.

That is the reality of defence. GDUK is a Welsh success story. The battlefield communication, Bowman, was developed in my constituency. The company has sent technology all over the world and has invested in upskilling its workers. The company takes the view that that would have been impossible without the support from Government for its successes. The fact is that once the technology is cut, it never returns. That is what we need to see when we are talking about defence. I have kept my comments short in order to allow other speakers an opportunity to make a speech..

--- Later in debate ---

[Mrs Moon]

The Labour Government held a number of reviews, but not full defence and security reviews. There was a constant review of our capability, which had to take place because of our involvement in Afghanistan. I do not think anyone can say that the Labour Government failed to review and assess constantly the needs of our armed forces.

I want to focus on the issues of sovereign capabilities and skills capabilities in the defence industry in Wales. I am particularly concerned that we are not looking at the impact of cuts on our long-term capacity to protect our troops with the equipment and the platforms that they need. Prime contractors are represented in Wales, as colleagues have mentioned. Defence manufacturers based in Wales include EADS in Newport, General Dynamics in Islwyn and Thales Optics in St Asaph. For every job created by the industry, 1.6 jobs are created elsewhere in the economy. It has been calculated that a £100 million investment in the industry creates 1,885 jobs throughout the UK economy, 726 of which will be directly in the defence industry.

I want to focus on the role of SMEs in the defence sector in Wales, and to make the case for supporting and nurturing them in the months and years ahead. According to research from the Defence Industries Council, there are more SMEs in the UK defence industry than in the French, German, Italian and Spanish industries combined. Interestingly, General Dynamics—in the constituency of my hon. Friend the Member for Islwyn (Chris Evans)—said in evidence to the Select Committee on Defence:

“GDUK believes passionately in building a strong supply chain based on British companies, and in particular SMEs; and we practise what we preach. 70% by value of our work on Bowman is undertaken by British companies.”

The Bowman programme is based in south Wales. In the same evidence, GDUK stated:

“We took a deliberate decision to concentrate that growth on south Wales. Following the recent signature of the contract for the Demonstration Phase of the Scout Platform, we expect the size of our work force to grow steadily over the next three years, again with much of that in south Wales.”

We have to remember that the impact of the growth of General Dynamics will rely strongly on 70% of SMEs being financially capable of surviving the current round of cuts and insecurity around contracting coming out of the MOD.

[Guto Bebb]

It would appear that we are again receiving a lecture about the role of defence spending in economic development. I am bemused by the fact that between 2003-04 and 2007-08, defence spending in Wales fell from £430 million to £390 million under the Labour Government.

[Mrs Moon]

The hon. Gentleman is trying to turn the whole debate. I am frightened by the debate, because the Government seem not understand that our defence capability relies on the defence industry being able to provide the equipment, and on our having the skills and the sovereign capability to provide our troops with the ability to defend this country.