Defence Industry: Scotland

Paul Sweeney Excerpts

Tuesday 30th April 2019 Westminster Hall

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Rutherglen and Hamilton West (Ged Killen) on securing this debate on such an important topic to Scotland. He made a number of important points and spoke with great passion about the opportunity for companies such as Thales with its multi-role vehicle programme. I recently visited Thales, which, as the hon. Member for Glasgow South West (Chris Stephens) mentioned, is located in his constituency. There is the potential to create 180 new jobs in Glasgow. Of course, opportunity is centred not just on that site, because of the importance of the supply chain. For example, Allied Vehicles, which is one of the largest automotive companies in Scotland and is located in my constituency, stands to benefit from participation in that programme if we drive forward the opportunity for automotive development in the defence sector in Scotland. That is just one of the many examples of how we can grow the supply chain in Scotland.

In preparing for the debate, I could not help looking back at the previous few years both in my life and career and in politics. Having worked at BAE Systems on the Clyde and at Scottish Enterprise, where I was part of the team that developed the aerospace, defence, marine and shipbuilding strategy with the industry leadership group, I know the role that a thriving defence sector can play when it is given not only resources but political backing. The importance of that was spelled out by the work of the ADMS strategy, which identified that 38,408 people are employed across 825 companies in the sector, and that there are £5.5 billion of sales a year, generating £1.7 billion in gross value added, from which there is an annual tax revenue of £540 million to the Scottish economy. That is a huge benefit to the Scottish economy. Sadly, the resources and political backing are not fully met by the Government. Political ideology seems to have blighted the clear economic opportunities provided by the defence sector.

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

I apologise for being late. Does my hon. Friend agree that the process for giving out defence contracts is fundamentally flawed?

--- Later in debate ---

[Mr Sweeney]

I thank my hon. Friend for making that point. As we are discussing the defence industry in Scotland, we must express the Opposition’s frustration that no one from the Scotland Office is present to answer for the Government. That crystallises the Opposition’s belief that the Secretary of State for Scotland is not providing the political backing that Scotland needs. I cast no aspersions on the resilient efforts of the Minister, with whom I often enjoy batting back and forth across the Dispatch Box, but it is a pity that the Secretary of State for Scotland could not be here. I will discuss that later in my contribution.

As my hon. Friend the Member for Rutherglen and Hamilton West outlined, the defence sector in Scotland takes many shapes and forms, from shipbuilding to the aerospace industry, with exceptional talents. Unfortunately, they are not being enabled to flourish as they should. There is a clear absence of an industrial strategy, and given the engineering expertise that can be found across the whole defence sector, it should be at the heart of any industrial strategy. The Government do not seem to appreciate that, and they will undermine the integrity of the defence sector in the near future if they do not rapidly get to grips with it.

If we take the obvious example of shipbuilding, which is easy for me as I worked in the industry, we see that the Government’s approach to the fleet solid support ships contract is nothing short of absurd. The decision not to factor the socioeconomic value of defence contracts into the procurement process is economically illiterate and flies in the face of common sense. The Minister and I have batted this back and forth, as I mentioned, and I am sure that in a few minutes he will tell me that it is all about value for money for the taxpayer. However, that argument falls apart because the contract’s socioeconomic value is not factored in at the procurement stage. The reported cost of the contract is £1 billion, but as studies such as those by the GMB union estimate, keeping the contract in the UK would secure up to 6,500 high-paid, high-skilled jobs, including almost 2,000 shipbuilding jobs that pay about 45% more than the average UK salary. Just think of the difference those jobs could make to the UK economy and to communities across Scotland.

The GMB has estimated that the contract would return about £285 million to the Exchequer in the form of taxes, national insurance contributions, lower social security payments and so on. If we built FSS ships in the UK, it would contribute to the nation’s prosperity. In fact, there would be a direct tax and national insurance return to the Treasury of up to £415 million—20% of the contract cost, which represents a bargain.

Data from other countries indicates that naval shipbuilding has a multiplier effect of 1.35, with £1.35 generated in long-term economic benefits for every £1 spent. Therefore, the UK benefit from a programme cost of £1 billion would be £1.35 billion. Having those ships built overseas would simply hand the benefit to someone else—that is probably why they are so eager to bid. Perhaps we should take a leaf out of their book and, at the Government’s discretion, ensure that those ships are built in the United Kingdom without competition—or, at the very least, ensure that the UK consortium wins the contract. That would secure jobs for the future.

At Rosyth, there is a gap between the completion of HMS Prince of Wales later this year and the expected refit of HMS Queen Elizabeth in 2030. The contract for the fleet solid support ships could ensure that the shipyard runs at smoother capacity during that timeframe. However, as I have said, the Government’s economic illiteracy could well prevent that from happening, leading to much greater inefficiency and costs down the line. I am sure the people of Fife will not let them get away with that. The Government are keen to celebrate the continuous at-sea deterrent, but I would much rather see continuous in-shipyard building across the country. We would far rather celebrate that.

That brings me to the fact that there is clearly no wider industrial strategy not only for the defence sector but for manufacturing as a whole. To use Fife as an example, the Government are refusing to keep the FSS contract in the UK. At the same time, not even 10 miles away, the BiFab yards in Burntisland are sitting there idle because of a lack of contracts. That is another example of the Government’s complete and utter short-sightedness.

[Mr Philip Hollobone (in the Chair)]

Order. The hon. Gentleman is over his time and the Minister must respond to the debate, so he needs to bring his remarks to a close.

[Mr Sweeney]

I shall steer it into port forthwith, Mr Hollobone.

The Government have spent the past few months saying how wonderful it is that this offshore wind deal has been signed, but we are not seeing the benefits spin off. Other countries are clearly benefiting from that, through state aid deals. Many references have been made to opportunities in the space sector, but yet again the Government have not convinced us about what they are doing.

I thank my hon. Friend the Member for Rutherglen and Hamilton West again for securing the debate. I have shown what a Labour Government would do with a coherent strategy. I look forward to hearing the Minister address the key points raised, including the need for a more robust defence industrial strategy to maximise the economic opportunities.