The defence industry in Scotland, particularly shipbuilding, plays a key role in equipping and supporting the UK armed forces. Defence contracts sustain thousands of skilled jobs and generate billions of pounds for the economy of Scotland. The Government greatly value the highly skilled work force in Scotland. Although the Government are not making plans for separation, as we are confident that the Scottish people will continue to support the Union in any referendum, it is worth noting that the UK has not had a complex warship built outside the UK since world war two. Were we to do so in the future, companies in a separate Scotland would, of course, be free to compete for those contracts, along with international bidders. However, any exemption from EU rules governing public procurement contracts would apply only to warships ordered from our own national yards.
The Minister has made very clear the position of Scottish shipyards, should separation for Scotland take place. Can he clarify the position for suppliers of fixtures and fittings based in Scotland when applying for contracts, if those contracts are given to English shipyards?
The way the EU rules work is that if a Government declare something to be warlike, they can claim an exemption from the EU competition rules on the basis of national security. In the case that the hon. Gentleman describes, those contracts would be non-warlike and would be subject to normal competitive rules. Scottish companies would have to win against global competition.
Can the Minister confirm that in the allocation of naval contracts and defence expenditure in general in Scotland, he will give no credence whatsoever to the notion that such expenditure should be governed by something approaching the Barnett formula—an idea which is as naive as it is risible, not least because it ignores strategic objectives, fails to take account of differing geographical levels of threat, and of course, from Scotland’s point of view, ignores the location of industrial capacity?
I can confirm for my right hon. and learned Friend that the Government would be governed by no such notion. Scotland does well out of defence at the moment; it has one of the UK’s three naval bases, it will have one of the UK’s three RAF operating bases and it has an Army brigade. Those who would seek to change that situation should spell out what it would look like under a separate arrangement.
Scotland also has a disproportionate underspend. The Scottish Government and the Scottish National party are, of course, very much in favour of continuing defence procurement co-operation, regardless of the constitutional situation. We believe that it is good for jobs, for manufacturers and for the taxpayers of both Scotland and England. With so many defence sector jobs in England dependent on Scottish taxpayers’ contributions towards procurement, why do not the UK Government simply concede that it would make perfect sense to continue with procurement co-operation if the Scottish people decide that they want defence decisions to be made in Scotland itself?
Defence procurement co-operation of the sort the hon. Gentleman describes would completely contravene EU competition rules. We are allowed to procure non-warlike stores only on an open and competitive basis, so the defence industry in Scotland would have to compete with South Korea, or whichever other country it might be, for future defence contracts.