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Procurement

Volume 606: debated on Monday 29 February 2016

2. What steps his Department is taking to support British jobs and industry through its procurement process. (903756)

16. What steps his Department is taking to support British jobs and industry through its procurement process. (903771)

In the strategic defence and security review published last November, the Ministry of Defence agreed a new strategic objective of contributing to the nation’s prosperity. We do that in many ways, not least through our procurement spend of some £20 billion a year with UK industry, around half of which is in the manufacturing sector. The British defence and security industry is the largest in Europe, and it plays a vital role in delivering battle-winning capabilities for our armed forces. As a Department, we are driving greater innovation into defence procurement, maximising opportunities for small and medium-sized businesses, investing in skills and contributing to a more prosperous economy.

That sounded good, and I am glad that the Department has such an objective, but the manufacturing industry in my constituency tells me that the Government have taken far too little action in favour of manufacturing, not least on business rates. In pursuit of those objectives, will the Minister tell me when he last spoke to the Department for Business, Innovation and Skills about refreshing and improving its industrial strategy?

I can tell the hon. Lady that I have meetings with colleagues in the Department for Business, Innovation and Skills on a monthly basis. In fact, I was in its offices earlier this month. We are constantly looking for better ways to encourage medium-sized and small businesses, in particular, to engage in the Ministry of Defence supply chain, and I am pleased to tell the House that we have confirmed with the Cabinet Office a target of 25% of MOD spend through SMEs, both direct and indirect.

I am genuinely interested in the Minister’s approach. I would like him to explain to the House why, for example, 60% of the steel for the new Royal Navy offshore patrol boats is being procured from Sweden, when in my part of the world, Wales, we have a real crisis on our hands with the steel industry.

I am happy to try to respond to the right hon. Gentleman, particularly in relation to the specifics that he has raised. About 20% of the steel used in the three offshore patrol vessels has been sourced from UK steel mills. As the prime contractor, BAE Systems issued invitations to 24 companies to tender for the steel contract. Only four were returned, of which only one was from a British contractor. It won the contract to provide steel, which was then sourced from a wide range of suppliers.

On Friday, I visited BAE Systems at Samlesbury, where I saw not only the skills that help it to manufacture parts for the Typhoon and the joint strike fighter, but the results of the millions of pounds it is investing in the training academy for 112 apprentices, which will open later this year, and in 3D printing, which means that it will be able to make parts and prototypes both in plastic and in metals. Does the Minister agree that such investments will help to keep BAE Systems at the forefront of its field in the world?

My hon. Friend speaks magnificently not only for his constituents, but for the largest UK defence contractor, whose main centre of engineering innovation is in his constituency. I congratulate him on that and applaud him for it.

Given that Ministry of Defence procurement operates under European law, what assessment has the Minister made of a potential exit from the European Union on UK SMEs that rely on MOD contracts?

As my hon. Friend knows, the UK defence and security industry is the largest in Europe. As the default position, we continue to place contracts on the basis of open competition. EU procurement directives apply to our procurement, which means that EU contractors are eligible to compete for our contracts in the same way as UK and other international companies, other than when we declare an article 346 exemption for warlike stores, which accounts for about 45% of our procurement.[Official Report, 2 March 2016, Vol. 606, c. 5MC.]

On procurement, I hope that the remarks about Europe made by my hon. Friend the Member for Bath (Ben Howlett) also apply in relation to our overseas territories. During the last recess, I had the chance to visit our servicemen and women in the Falklands. Will the Minister join me in paying tribute to the 1,200 personnel there? Will he confirm that this Government will work closely with the Falkland Islands Government to improve the accommodation there and will procure such improvements through British providers?

My hon. Friend might have preferred to put that question to the Secretary of State, who has just visited the Falkland Islands. He is the first United Kingdom Defence Secretary to do so for over a decade. I can confirm to my hon. Friend that, as part of the SDSR conclusions, the Ministry of Defence has committed to investing £180 million in the Falkland Islands, including the improvements he seeks to the accommodation.

18. There are more than 15,000 high-skill, high-value jobs in the defence sector in the north-west alone, with earnings that are more than 40% higher than the national average. We have heard previously about the lack of a proper industrial strategy for defence with respect to steel, so when will the Government look at the wider economic benefits when it comes to protecting those high-skill, high-value jobs and to creating new ones in the context of defence procurement? (903773)

The hon. Gentleman should have a word with the leader of his party. Government Members care about both security and prosperity, and the hon. Gentleman may like to remind his leader that grandstanding on a Saturday places at risk not only the ultimate security of the nation, but the tens of thousands of jobs and the hundreds of companies in the submarine industry in this country.

Perhaps the Minister should listen to the questions, stop throwing out allegations of grandstanding and take the issue of the steel industry in this country seriously. The chronic under-investment in steel in this country by this Government is nothing less than a national disgrace. As my right hon. Friend the Member for Delyn (Mr Hanson) said, 60% of the steel required for the Royal Navy’s offshore patrol vessels has been sourced from Sweden, to name but one example. Does the Minister not agree that the MOD should consider wider employment, industrial and economic factors in its procurement policy? Its policy is obviously not working given that, as he has said, such a low level, in truth, comes from British companies.

UK suppliers make a significant contribution to the supply of steel for our defence programmes, including some 94% of the steel in the aircraft carriers—77,000 tonnes—being sourced from UK mills. The Government and I recognise that there is an issue that is affecting steel production in this country. That is why we established the steel procurement working group, on which the Ministry of Defence is represented. I instructed the Department and wrote to our major defence prime contractors last December to ensure that the guidance on steel procurement was implemented across defence. That will enable proactive engagement with the UK steel market on procurement pipelines through the supply chain and ensure that cost calculations can be taken into account over the whole life, and not just at the initial price.

The exchanges today are, to put it mildly, a tad long-winded. There are a lot of questions to get through. What is required is a pithy question and a pithy answer. It is not very difficult.