National Shipbuilding Strategy

Martin Docherty-Hughes Excerpts

Wednesday 8th February 2017 Westminster Hall

[Douglas Chapman]

The hon. Gentleman makes a good point. We are constantly told that the Type 31s are also for the export market. I have asked parliamentary questions on whether the Government could provide details of their homework on what that export market might look like. I am afraid that, to date, there are no answers. We need to make progress with the information we have, which is why we are questioning the Minister today.

Anyone who has taken an interest in this matter will know that BAE Systems has two possible designs. It is important that we get on with picking one, so that we can ensure—to follow up on the hon. Gentleman’s point —that we have an exportable product that we can take to market. However, we are falling behind. The Franco-Italian Aquitaine class frigates are already in service with La Royale and have been exported to Egypt and Morocco, so we are already missing the export boat with regard to the Type 31s.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

My hon. Friend should also note the Danish Absalon class frigates, which have proved to be very versatile, reliable and affordable ships for a valuable ally’s navy.

[Douglas Chapman]

Of course. That just makes the point that while the Government sit back, dither and try to work out what the strategy might be, we have great examples of other countries—small countries—that are able to export their own products into the markets that they want to serve.

Quite simply, we have been waiting for the future surface combatant, be it the Type 26 or the Type 31, since 1994. Sir John’s report may seek a “sea change” in naval procurement, but the fact is that we had a defence industry strategy in 2005, a 15-year terms of business agreement signed by BAE Systems in 2009 and a consolidated shipbuilding plan for the Clyde, with support from the Government and the trade unions, in 2013. How on earth has it taken the Government so long to get to a strategy? Why do they still not have one by 2017? Surely that is a damning indictment of their competence to run the country. Again, I plead with the Minister: let us get on with it.

My second question for the Minister is about ensuring that when HMS Queen Elizabeth enters service, it will do so with a carrier group worthy of a next-generation Navy. Those carriers—the largest ships ever built for the Royal Navy—are being built on time and on budget in my constituency by the superb workforce in Rosyth. It would be a great disappointment to those workers, those men and women—

[Douglas Chapman]

I thank the hon. Gentleman. That is a bit of a non-question for me, but I am sure the Minister will be happy to add it to her extensive list of questions already put.

The ships in Rosyth are the biggest that the Royal Navy has ever built, and various people have been involved in building them from day one and bringing the parts from all areas of the UK to Rosyth, but we must ensure that when those ships sail down the Forth, they are adequately protected. At the moment, I struggle to see how that battle group will fit together.

As I said, although 2017 may be the year of the Navy, 2023 will be far more significant, because in 2023 we will know whether the strategy has done what it set out to do in the first place. By 2023, the initial tranche of 24 F-35Bs should be in place to fly operations from the carriers, and the first Type 26 should be entering service to replace HMS Argyll, which will be the first Type 23 to leave service.

The Defence Committee highlighted the question of the carrier group in our November report and I hope we will press the Minister further on it, but quite simply the Government are running out of time to uphold their end of the bargain. Quite honestly, I am not holding my breath.

I expect many right hon. and hon. Members will talk today about the state of the Navy, but going over some of the history again might be worthwhile. At the time of the infamous Nott report, the Royal Navy had 60 frigates and destroyers, and even by the end of the Falklands conflict, it still had 50. In the 1998 strategic defence review, long after the cold war had ended, a floor of 32 ships was constructed. However, the Government now crow about their commitment to 19 frigates and destroyers.

Even as we move to an era of fewer and more powerful ships, 19 is still too low a number and has seen the UK fail in many of its commitments to its allies. I am not alone in finding it unacceptable that the UK has often been unable to provide a ship for NATO’s standing maritime groups; that we had to miss the recent anniversary celebrations of the New Zealand navy because a suitable ship was not available; and that offshore patrol vessels are having to fill in on tasks relating to the fleet ready escort and the Royal Navy’s presence in the Caribbean.

[Martin Docherty-Hughes]

My hon. Friend makes a good point about the 75th-anniversary celebrations for the royal navy of New Zealand. In November, our allies the United States, Canada and Australia sent ships to the international naval review—even Tonga and the Cook Islands sent ships to the naval review—but the United Kingdom Navy sent nothing. That is not exactly the best start to a brave Brexit diplomatic offensive, is it?

[Douglas Chapman]

Again, I cannot help but agree with my hon. Friend. He makes a very valid and good point, but if our backs were to the wall and we needed to provide ships for NATO, that would be a much more serious commitment that the UK would have to make. If we do not have enough ships to fulfil those commitments, that is even more concerning.

I said that the current fleet was 19 in number. Two ships, HMS Diamond and HMS Lancaster, are being used as training ships, so that reduces the number from 19 to 17 usable frigates and destroyers.

I hope that the Minister will break the habit of a lifetime today and actually give us the answers to the questions that we have asked. Quite simply, the Royal Navy and the carrier programme demand that. It starts with a contract for the Type 26 programme being signed, so let me reintroduce an old slogan: “We want eight and we won’t wait!” If we were to add anything to that, it would be that we cannot afford to wait any longer.

I hope that the Minister can also answer my last question. How can we ensure that surface shipbuilding does not suffer as a result of the proliferation of big-ticket items going through the order book over the next decade? The headline from Monday’s Financial Times says it all: “Spiralling cost of UK defence projects signals hard choices”. I raised this issue at the most recent Defence questions. With the years 2020 to 2023 being the most critical in the equipment procurement plan, I fear what Professor Malcolm Chalmers of the Royal United Services Institute highlighted in the FT article:

“the historic response at MoD has simply been to push programmes to the right and allow service dates to slip.”

That story followed last month’s excellent National Audit Office report, which highlighted, among other things, that the “headroom” used to account for any potential overspend had already been spent. The report stated that

“any further capability requirements during the lifetime of the Plan period will have to be met through a reprioritisation”.

I know that all those situations put the Minister in a really difficult position, but the clear questions that I must ask again are these. When will we see the national shipbuilding strategy? Can the Minister assure us that, by 2023, the Royal Navy will be able to form a fully functioning carrier group, with Type 26s, Type 45s and the requisite Royal Fleet Auxiliary ships? Finally, how will the shipbuilding strategy ensure that surface naval ships are prioritised in future procurement decisions? Let us hope that today we get some answers and that 2017 does become the year of the Navy, not the year that the Navy wants to forget.

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[Mr Jones]

The hon. Lady makes a very good point. The issue is not just about generating the skills in the first place—the key investment that companies need to make in apprenticeships and other things. This is now an international market. There are perhaps engineers working on the Clyde who, if there is no work, will move elsewhere in the world. In some cases, they will not come back to the industry. We found that with the Astute programme; nuclear engineers left and trying to get them back, or regenerating those skills and expertise, was very difficult.

[Martin Docherty-Hughes]

The hon. Gentleman is making an excellent point. Critically, the Canadian suppliers were actually in Glasgow the other week looking for such people to take to north America.

[Mr Jones]

Again, the hon. Gentleman makes a very good point. This is an international market and these skills are very sought after. This comes back to my point that if we want this capability in the UK, we have to nurture and protect it and the only way to do that is by having a throughput of work.

The hon. Member for Dunfermline and West Fife raised the issue of the Type 26. The delay is adding to that uncertainty. The wider piece really concerns me. To give the impression that we are going to have that drumbeat of work, we have had the Type 31 inserted into the programme. I have studied in detail to try to find out what the Type 31 actually is; no one has been able to tell me yet. It is a bit like the mythical unicorn—everybody thinks it exists, but no one has ever seen one. If the MOD can say that there is a budget line for it, it should please identify that—in the current procurement there is no budget line for it at all in the programme.

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[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to follow the hon. Member for North Durham (Mr Jones) and to have listened to his technical expertise in this area. I very much appreciated his speech and particularly his support for the Clyde shipyards. I congratulate my hon. Friend the Member for Dunfermline and West Fife (Douglas Chapman) on securing the debate, and it is always a pleasure to see you in the Chair, Mr Evans.

I shall start, as the hon. Member for North Durham did, with the extraordinary process regarding the strategy. He is not the only one who thought that Sir John Parker’s report would be the national shipbuilding strategy; I and other hon. Members of the House did too, as did trade unions and the defence industry.

[Martin Docherty-Hughes]

The Minister said that a signed copy would be sent to my hon. Friend the Member for Argyll and Bute (Brendan O'Hara), but we are still waiting for it. Clearly that means that the actual statement has not been produced.

[Chris Stephens]

I remember that exchange, and there was clearly confusion about the report. I also find it extraordinary that although Sir John Parker’s report was sent to the Ministry of Defence on 3 November 2016, this is the first opportunity that hon. Members have had to discuss it in detail. In November or December, there should have been a debate, or a series of debates, on the report, so that hon. Members could give their views on it and feed into the process. I shall come to that later.

I was very concerned when it was pointed out to me that on 2 January in The Daily Telegraph—not necessarily a newspaper that I subscribe to—MOD sources were not only saying that there is no budget for the Type 31, but that it will not happen and the plan will not be realised. We need to go back to the former Prime Minister’s announcement on the Clyde in my constituency in 2014, when he promised that 13 Type 26 frigates would be built on the Clyde. We were then told that there would be eight Type 26 frigates and five general-purpose frigates. As the hon. Member for North Durham outlined, we do not know exactly what that capability is, but we were told, “It’s okay; relax, because eight plus five equals 13.” We are still awaiting the final sign-off, not only for the eight Type 26 frigates but for the five general-purpose frigates. I hope that the Minister will tell us, if there is indeed a budget for Type 31 frigates, what it is and what the procurement timetable is for Type 26 and Type 31 frigates.

[Chris Stephens]

I would be very concerned about that, and I will come to the effects of that later. Sir John Parker’s report is an honest attempt to end the “feast and famine” procurement processes by the Ministry of Defence that have often plagued the shipbuilding industry. If any other public services carried out procurement processes in the way that the Ministry of Defence does, there would be uproar in the streets—imagine if it was equipment for the health service or education, and so on.

I am pleased that Sir John Parker’s report also recognises the capability and skills of shipyard workers on the Clyde—in my constituency, in the Govan shipyard, and in Scotstoun, in the constituency of my hon. Friend the Member for Glasgow North West (Carol Monaghan)—working on digital technology adapted from the automotive sector and with new working practices that have increased productivity. It is an honour and a privilege to represent them in this Parliament. The shipyard workers are also supported by trade unions and are represented at shop-floor level by representatives who have campaigned tenaciously over the years to ensure that future work is secured. Any announcements that come from the Government are a victory for them more than anyone else. However, as someone who had family members in Yarrows who were made redundant under a Tory Government, I always view such commitments from this Government with suspicion when it comes to shipbuilding.

Sir John Parker’s report also recognises that the Royal Fleet Auxiliary ships should be assembled in the UK. It really is a nonsense that that work has been farmed out elsewhere. I would hope that Rosyth, to cite one example, would have that opportunity. Failure to ensure that Royal Fleet Auxiliary ships are built in the UK will make the report fall at the first hurdle. An award to a UK yard for Royal Fleet Auxiliary ships would demonstrate that the Government are serious about ensuring that an export model can be achieved and that investment in technology can be kept.

[Martin Docherty-Hughes]

My hon. Friend is talking about Type 31s, but given the fact that the Secretary of State and also the leader of the Conservative party in the Scottish Parliament have said that there will be work on the 13 Type 26s, where is that guarantee from the Government?

[Chris Stephens]

I hope we will get that today. I hope the Minister will give us that commitment.

There is one fatal flaw, however, in Sir John Parker’s report, which needs to be tackled. His assumption that there is no precedent for building different first-class naval ships concurrently is wrong. In the 1990s, Yarrow shipyards were building and constructing Royal Navy ships as well as exporting ships to Malaysia. This precedent was envisaged by the Clyde shipyard taskforce in 2002, chaired by the then Scottish Executive Minister, Wendy Alexander, and the former Scottish Office Minister, Brian Wilson, which ensured that the Govan shipyard was responsible for the steelworks and that Scotstoun was to become the centre for excellence.

There is therefore reason to argue that Govan could construct the Type 26 frigates and Scotstoun could develop the new Type 31 frigate, using the specialist design capability to ensure that it could be exported to other countries. Such technical expertise to carry out the work is already there on the Clyde, but it will require investment. MOD pressure not to invest in the frigate factory—promises that led to the demolition of the covered berth and module hall at Scotstoun—has meant that we still have a constrained capacity and that the full potential for shipbuilding on the Clyde has not yet been realised. I want to hear from the Government about progressive plans with respect to shipyard reconstruction to unlock significant long-term advances and savings for the industry so that it can win more orders, not only here but from overseas.

Sacrifices have been made by shipyard workers on the Clyde. Let us not forget that to get to where we are now, workers on the Clyde took redundancy to ensure that the rest would be kept and that they would be match-fit to build the 13 Type 26 frigates. I hope that today the Minister will confirm procurement processes for the Type 26 and Type 31 frigates. The trade unions have said that failure to ensure that the Clyde leads on the general-purpose frigates would be a betrayal.

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[Steven Paterson]

The hon. Gentleman must have read my mind, because I am coming on to say that point 18 of the NAO report summary states:

“Changes in foreign exchange rates, such as those that happened after the EU referendum, can pose a significant risk to the Plan’s affordability in the future. As at 10 January 2017, the pound was 21.4% below the exchange rate with the US dollar and 4.2% below the exchange rate for the euro used in the Department’s planning assumptions. Approximately £18.6 billion of the Plan is denominated in US dollars and £2.6 billion in euros over 10 years.”

That will have a major impact.

I understand that the Department has a certain amount of protection against foreign exchange rates in arranging its finances, but does it not worry the Minister that such a large amount of the plan is predicated on foreign exchange rates, with the Government appearing to be gambling that the rate will not go up further? Given the Government position that economists cannot be trusted, which is what many current Ministers said during the recent referendum—and going by even a cursory look at the financial predictions before Brexit—can we really have any confidence that the envisaged programme can be afforded? That is why we need reassurance today.

The shipbuilding strategy is long overdue and, given the current state of the Department’s books, it is badly needed to provide clarity for those working in shipbuilding and those monitoring our national defence readiness going forward.

[Martin Docherty-Hughes]

My hon. Friend will correct me if I am wrong but, to take F-35s as an example, they are 85% built in the United States, and therefore bought in dollars. That is critical when we reflect on the impact of the fall in the pound compared with the dollar.

[Steven Paterson]

Absolutely. That illustrates the point very well. I hope that the Minister will reassure us today about the Type 26 programme and the Type 31 programme, about the ships being built on the Clyde as promised, and on the affordability of the shipbuilding strategy that the Government will hopefully soon present. Finally, I hope that by the end of the debate we shall know with certainty when the overdue shipbuilding strategy will be published.