Ministry of Defence

Debate between Nia Griffith and Luke Pollard

Monday 26th February 2018 Commons Chamber

[Nia Griffith (Llanelli) (Lab)]

I welcome this opportunity to debate the MOD budget, and I thank the hon. Member for Gainsborough (Sir Edward Leigh) for his part in securing it and for his excellent opening speech. We have heard a number of thoughtful contributions this afternoon, and I hope that Members will forgive me if I do not mention them all individually owing to the lack of time.

It is clear that there is deep dissatisfaction at the state of the defence budget on both sides of the House and a real desire for proper investment in our armed forces and our nation’s defences. We are all used to hearing from Ministers that the defence budget is growing, and I am sure that there will be more of that this evening, but the truth is that years of deep cuts by the coalition and Conservative Governments mean that the defence budget is now worth far less than it was when Labour left office.

Defence spending has been cut by nearly £10 billion in real terms between 2010 and 2017, and the defence budget will fall in real terms next year according to the Government’s own figures. Our purchasing power has been cut dramatically due to the sharp fall in the value of the pound, and then there is the gaping hole in the Department's defence equipment plan. It was truly shocking to read the National Audit Office’s recent report which concluded that the plan is simply not affordable and that the funding gap may be as large as £20.8 billion. That conclusion was not particularly surprising since the affordability of the plan has been in doubt for some time, but that should not detract from the seriousness of the situation. The plan represents the £180 billion of equipment and associated costs that are required by our armed forces over the next 10 years in order to keep this country safe, yet it is clear that the MOD does not know how on earth it is going to pay for it.

That is the disastrous legacy of the decision to make deep cuts to the defence budget in the 2010 SDSR, and the belated attempt to row back five years later without having the necessary funding in place. It also serves as a warning about how difficult and costly it is to replace a capability once it has been cut, as we are now seeing with the maritime patrol aircraft. The result is a plan that, in the words of the NAO,

“does not provide a realistic forecast of the costs the Department will have to meet over the next 10 years”.

That would be unacceptable for any Government programme on such a scale, but it is deeply worrying in the context of the many pressures already facing the defence budget. Notably, the plan does not even include the cost of the Type 31e frigates, nor does it address concerns about the cost and affordability of the F-35 programme—concerns that have grown as Ministers have repeatedly been unable to supply adequate cost estimates for the F-35s, something which the Defence Committee described as “wholly unsatisfactory”. I would be grateful if the Minister set out the Department’s response to the NAO’s conclusions and outlined what urgent steps will be taken to address the issue of affordability at the earliest opportunity.

The equipment plan is also heavily reliant on billions of pounds of efficiency savings. We all want value for money for the taxpayer, but Ministers have been keen to make assumptions about savings without sufficient evidence that those savings are achievable. The Select Committee concluded in respect of last year’s plan that

“it is extremely doubtful that the MoD can generate efficiencies on the scale required…or detail how it would proceed to do so”.

Sadly we seem to have exactly the same issues with this year’s plan, because the NAO again finds

“a lack of transparency on the full amount of savings included in the Plan and the Department does not have evidence to support all the savings it has claimed to date.”

We all agree that every effort should be made to maximise efficiency savings, but the Government’s consistent over-reliance on projected savings to fund key programmes—savings that they are patently failing to achieve—suggests either a shocking naivety or a poor attempt to disguise yet more cuts.

That is also one of the biggest risks facing the modernising defence programme, as three of the four work strands focus so clearly on generating efficiencies through reforming the management of the MOD. As I have said previously, the Minister and his colleagues will have support from both sides of the House if the review results in proper investment for our defences and our armed forces, but there will be deep disquiet if it merely results in yet more cuts of the kind that have been widely briefed in the press in recent months.

That brings me to the potential cuts to our amphibious capabilities. I was in Plymouth with my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) on Saturday, and there is real concern in that city about the fate of HMS Albion and HMS Bulwark. Ministers, including the Defence Secretary just last week, have repeatedly failed to address speculation that those ships will be taken out of service earlier than planned as a way of generating short-sighted savings.

Although I appreciate that the defence review is ongoing and will not report until the summer, the Minister is not precluded from stating categorically that the review will not result in cuts to our amphibious capabilities—cuts that will leave us with significant gaps—and I sincerely urge him to say something this evening.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

I thank my hon. Friend for visiting Plymouth at the weekend. Does she agree that we not only need to provide certainty for the crews of HMS Albion and HMS Bulwark, and for the Royal Marines, but we also need to recognise that the sale of HMS Ocean to Brazil has hit morale in the city and is damaging retention in our armed forces?

[Nia Griffith]

My hon. Friend makes a valid point.

It is clear that the work strands of the review will look in detail at the way in which industry does business with the MOD, which is an area where progress can and should be made. It is apparent from responses to the consultation on the defence industrial policy refresh that there is a desire for the MOD to be more flexible and collaborative in setting requirements, as well as in engaging with industry at an earlier stage in the procurement process.

Opposition Members would also like the definition of “good value” to be expanded to include wider employment, industrial or economic factors when making procurement decisions and awarding contracts. There have been a few nods in that direction from Ministers, and we welcome the reference to it in the national shipbuilding strategy, but the defence industrial policy refresh is extremely disappointing, in that it fails to make any such changes.

The Select Committee also called for a broader definition of “value for money”. This call has received the support of the trade body ADS, as well as defence trade unions such as Unite and Prospect, so I would be grateful if the Minister could explain why the MOD has decided not to pursue such changes.

There is also strong support within industry for fair and open competition, wherever possible, when making procurement decisions. The Secretary of State reflected that in general terms before the Select Committee recently, but there has been no firm commitment that the contract for the new mechanised infantry vehicles will be subject to open competition. I would be grateful if the Minister could confirm this evening that this really will be the case.

The MOD budget has also taken a substantial hit due to the sharp fall in the value of sterling following the EU referendum. The Department faces a real challenge given that so much of the equipment plan is denominated in foreign currencies. That is made worse by the fact that the MOD has, for some reason, used exchange rates that do not reflect current market rates—something that the NAO identifies as a risk to the plan.

Of course, one reason for the collapse in the value of the pound is a clear lack of investor confidence because of how this Government are handling the Brexit negotiations. The Opposition firmly believe that a clear commitment to negotiating a customs union with the European Union would provide the certainty that industry and investors need that they will not be hit by burdensome and unnecessary tariff barriers when Britain leaves the EU.

That is particularly important for defence companies, which depend on pan-European supply chains and simply cannot afford to see barriers to trade imposed between Britain and our European partners. But the Government have recklessly decided, point blank, to rule out a customs union, in a move that seems clearly designed to appease the hard right of the Conservative party rather than reflect the interests of our economy and workers in the defence industry.

Finally, as well as the severe challenges to the MOD budget in the here and now, there is also the spectre of massive potential costs coming down the line for forces accommodation. As the NAO’s recent report highlights, the Conservatives’ decision to privatise the housing of service personnel and their families in 1996 has been a disaster from start to finish.

The Conservatives ignored repeated warnings at the time, including from my right hon. Friend the Member for Warley (John Spellar), that this sell-off of public assets would not deliver value for money, and now we learn that the deal may have cost the taxpayer up to £4.2 billion. That has left us in a ridiculous position whereby the Government now rent back the same accommodation at increased cost. The MOD will be held over a barrel if the company demands costly rent rises when the lease is up for renewal in 2021. I would be grateful if the Minister could set out exactly how the Government plan to manage the lease renewal process in a way that does not simply result in further unnecessary costs to the taxpayer.

There is support on both sides of the House for real investment in our national security and for an end to the short-sighted and painful cuts that have marred the last seven years. We cannot do security on the cheap. It is time for this Government to deliver the proper investment in defence that the British public expect.