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Armed Forces Equipment

Volume 508: debated on Thursday 25 March 2010

Further to my statement to the House on Monday 22 March, I am pleased to announce the next steps on three projects that will deliver vital equipment and support to the Royal Navy in the coming years and maintain a sovereign maritime industrial sector configured to meet our defence needs efficiently.

We have decided to proceed with the assessment phase for the type 26 Combat Ship, the Royal Navy’s next generation surface warship; to sign a terms of business agreement (TOBA) with Babcock Marine covering surface and submarine support activities; and to commit to the initial build and long lead procurement activities for Astute Boats 5 and 6 respectively at BAE Submarine Solutions at Barrow-in-Furness.

The type 26 Combat Ship will provide the backbone of the Royal Navy’s future surface combatant force from early in the next decade. We envisage it being optimised for anti-submarine warfare, providing protection to maritime task groups, the strategic deterrent, and land forces in the littoral environment though it will also be able to operate in a wide variety of other roles, able to deploy an embarked military force by boat or helicopter, undertake surveillance and intelligence gathering activities, conduct counter-terrorism and counter-piracy operations, and support disaster relief and humanitarian operations.

The assessment phase will be a £127 million, four-year contract with BAE Systems Surface Ships that will deliver a cost-effective ship specification for development and manufacture. Among other things, it will examine whole life costs, consider the potential for international export, develop tailored logistic support arrangements and produce a full ship specification for consideration prior to the main investment decision. In doing so, this work will protect skills and employment in the warship design sector and maintain a key industrial capability for the UK.

We have delayed proceeding with this work until the recent planning round was completed, and any further significant delay would increase the risk that we would be unable to maintain the maritime industrial workload at a cost-effective level once carrier manufacturing is past its peak. It would also increase the risk of our having to retire the type 22 and 23 Frigates before the type 26 is ready to replace them. However, to ensure that we can incorporate any changes to the design or concept of operations that might result from the strategic defence review (SDR), a mid-programme review point has been included as part of the work.

Secondly, as part of our ongoing efforts to deliver increased value for money and support the continued transformation of the maritime industrial sector, I am pleased to announce that we have signed a 15-year partnering agreement with Babcock Marine. We announced our intention to negotiate a so-called TOBA with Babcock Marine in 2007 following the acquisition of Devonport Management Ltd by Babcock International Group, and it has been under negotiation for many months. This agreement will guarantee Babcock Marine’s role as our lead industrial partner for submarine support, maintenance and decommissioning, and our preferred supplier for engineering and other services for surface warships and submarines at Her Majesty’s Naval Bases Devonport and Clyde. Babcock Marine will also continue to advise the Ministry of Defence on the initial phases of submarine dismantling options and will play a more active role in Through-Life Capability Management for the Royal Navy’s fleet, ensuring maximum availability and value for money in the support of future warships and submarines.

In exchange for this guaranteed scope of work, the agreement will deliver guaranteed savings and benefits to the Department of at least £1.2 billion over 15 years, at outturn prices. These savings will flow from performance improvement and efficiency measures enabled by long-term confidence, and will be embedded in the contracts for goods and services that will be negotiated within the framework of the agreement. I would emphasise that, because the agreement will not guarantee a specified level of work, we can be confident that the choices available in the SDR will not in any way be constrained but by proceeding now we will ensure that we can start delivering the savings envisaged as soon as possible.

The Government have also made a contractual commitment to proceed with the initial build of Astute Boat 5 and long-lead procurement activities associated with Astute Boat 6, at a total cost of over £300 million. This commitment is necessary now to ensure a consistent workload for the UK’s submarine building industry. This investment will allow the timely delivery of the Astute class boats, which are the biggest and most advanced attack submarines ever ordered for the Royal Navy. Furthermore, since the same industrial skills, experience and capability are necessary to deliver the successor deterrent submarine programme, this investment will play a part in ensuring a smooth transition from the Astute programme to the successor deterrent.

These decisions demonstrate the Government’s commitment to the long-term future of the Royal Navy and the UK’s maritime defence industry. They will deliver vital defence capability and sustain a world class, efficient sovereign maritime industry.

I intend to make more announcements in the coming days about new and additional capability for our armed forces and defence contracts for UK industry.