Defence Procurement and Supply Chains

Stephen Morgan Excerpts

Tuesday 1st December 2020 Westminster Hall

[Stephen Morgan (Portsmouth South) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Charles. I thank my hon. Friend the Member for Birkenhead (Mick Whitley) for securing the debate on this important issue. As has been said, it is a timely debate—I absolutely agree—and I thank everyone for taking part. A number of excellent points have been made by colleagues on both sides of the House on the value of defence procurement and its wider economic benefits. I acknowledge those comments and will make a few broader points about the importance of defence procurement and personnel to the security and prosperity of our country.

I welcome the four-year funding settlement for defence announced by the Prime Minister last month. It is a long overdue upgrade to Britain’s defences after a decade of decline since 2010. The extra investment in R&D is important, not just for defence and security, but because, if managed correctly, it will have a positive multiplier effect in areas such as aerospace, maritime, higher education and the wider supply chain across the UK. I was particularly pleased to hear that, at such a difficult time for our economy, the funding is set to create 10,000 jobs a year and 40,000 jobs in total. We of course welcome that, and will hold the Government to account on it.

Labour wants to ensure that new jobs are created in all parts of the UK, which brings me to my central point. While the Prime Minister’s announcement of cash was welcome, the spending review figures confirm that the £16.5 billion injection is all capital spend, with day-to-day revenue funding for defence expected to flatline at around £31.5 billion per year. That equates to a 2.4% real-terms cut through to 2024-25. Inevitably, that will mean further cuts to our armed forces and armed forces jobs. What we saw from the Prime Minister was an announcement without a strategy. Capital investment is vital and long overdue, but it is nothing without personnel and staff to support it.

Labour stands squarely behind our armed forces, including everyone from squaddies to engineers, from caterers to staff at bases. Although the Government have made important commitments to infrastructure, the Ministry of Defence seems to have a blind spot for staff and service personnel. After the last defence review in 2015, the Government fudged the funding figures with efficiency savings and invest-to-saves, opening up a £13 billion budget black hole. They failed to recruit the troops that the UK needs, leaving the military 1,200 troops short of strength.

As we heard earlier, there is also continued concern about the splitting up of service contracts at our bases—the ongoing dispute at Her Majesty’s Naval Base, Clyde is an example. Over the last few years, some services have been subcontracted, leading to a downgrade in terms and conditions. Cleaners transferred from Babcock to ISS, for example, have seen their pensions decline and their sick pay reduced. Managed incorrectly, those contracts pit team members against each other and begin a race to the bottom on standards and working conditions for staff who are indispensable for day-to-day defence and security operations. When the Minister responds, I shall be keen to hear what he can do to reassure workers at Her Majesty’s Naval Base, Clyde.

The Clyde example is particularly important because, of course, Faslane is home to the continuous at-sea nuclear deterrent—an essential part of our nation’s defence infrastructure. I was fortunate enough to visit HMS Astute while she was alongside at Faslane in 2018, where we saw the expertise and dedication of service personnel aboard. It was during the week that Carillion collapsed, and as such was particularly instructive about the perils of mismanaging Government service contracts and the devastating impact this can have on vital services. Ministers must avoid the mistakes of the past, and place service personnel at the heart of defence and security operations. They must also use their significant buying power to drive up standards, and reinforce the high standards and working conditions that our personnel’s service and expertise deserves.

More broadly, this Government have an important opportunity to use defence procurement as a powerful lever to unleash prosperity in every region and every nation of the UK, including many areas that the Government claim they would like to level up. As ADS Group notes, the UK defence industry had a turnover of £22.7 billion in 2019, and directly supported 132,000 jobs, including 5,000 apprentices. Sadly, for five years Ministers dragged their feet on whether the Royal Fleet Auxiliary’s new fleet solid support ships would be built, as my hon. Friend the Member for Birkenhead has pointed out and my right hon. Friend the Member for Warley (John Spellar) tirelessly campaigns on and has reminded us of today.

There are concerns that the MOD may still accept bids from consortiums, including—even led by—foreign companies. As I have said previously, there are enormous benefits to rewarding defence contracts to British companies, outside of the obvious security benefits. From the revenue generated for the Exchequer to the higher national insurance contributions, building British is a no-brainer, so I say to the Government that what can be built in Britain must be built in Britain. The defence and security industrial strategy must also involve plans to develop the UK’s future capability to build in Britain. This will be one of the tests by which we will judge the Government’s long-awaited integrated review.

I have several asks of the Minister, and would be grateful if he could provide some clarity on these issues. First, when will the Government publish the defence and security industrial strategy and the associated integrated review? Will the new defence and security industrial strategy place the rights of staff, who are indispensable to day-to-day defence and security operations, at the very centre of Government procurement, or will it continue the trend of undercutting them, threatening to undermine the operation of vital defence and security assets? Finally, will the strategy make an unambiguous commitment to spending on, and building, all platforms and assets in the UK to help built British jobs? I look forward to the response from the Minister.

Today, we have heard a positive consensus from all sides about the new funding. Ministers must now make sure that they put that new money to best use. They must close the £13 billion black hole in the defence budget, recruit and properly value our service personnel, and build new military equipment here in Britain.

[Sir Charles Walker (in the Chair)]

Due to a rash of good behaviour, the Minister has acres of time in which to expand an argument and answer questions. However, would he please leave Mr Whitley two minutes at the end to wind up in his own way?