I beg to move,
That this House recognises the important contribution of the defence industry to the UK; calls on the Government to support the UK defence industry by taking into account the economic and employment benefits to the UK when awarding contracts and to publish a full, overarching defence industrial strategy; and further calls on the Government to make the competition for the Fleet Solid Support ships contract a UK-only competition to maximise the return on that contract.
Today could be a significant step forward for things coming home. Of course, I am talking about the contract for the fleet solid support ships. As a proud island nation, the UK shipbuilding industry is vital for our prosperity and defence—a message that workers’ representatives from the shipyards spelled out loudly and clearly to Members yesterday. The industry makes a substantial economic contribution, directly employing some 23,000 people and contributing £1.7 billion a year to the UK economy.
Throughout our history and to the present day, the industry has supplied our Royal Navy with the ships that it requires, thereby playing a crucial role in the defence of these islands. Our ships contribute to many NATO and EU missions, including Operation Atalanta, which combats piracy in the gulf of Aden and off the horn of Africa, and they were vital in the humanitarian relief efforts following last year’s hurricanes in the Caribbean.
In the light of events this week, I will not suggest which ship the Government most closely resemble, but the phrase “rearranging the deckchairs” comes to mind. I know that Members on both sides of the House want the industry to thrive, and the Government have an important role to play in that regard. I was disappointed to hear in Defence questions on Monday that the Government will not publish the conclusions of the modernising defence programme this week, as had long been promised. Instead, we have the Secretary of State’s less than inspiring commitment of “aiming to” introduce the headline findings before the summer recess. We wait with bated breath.
I thank the right hon. Gentleman for his excellent intervention.
I hope that the delay will allow Ministers to reflect on the overwhelming case for an active defence industrial strategy that recognises the immense value of building in Britain and takes a longer term view of the orders that the Government will place, giving industry the confidence to invest in the UK and to plan for a steady stream of work.
Long-term planning is vital, not just for the prime contractors but for the supply chain companies and foundation industries such as the steel industry. It gives them the time to gear up to fulfil orders, and the certainty that they need to justify additional investment. A clear strategy needs to balance getting the very best value for the taxpayer—a crucial consideration, especially when the defence budget is under such strain—with the needs of our armed forces and defences. This would allow us to defend sovereign capabilities, support UK manufacturing and continue to develop the highly skilled jobs and apprenticeships that allow us to compete on the global stage. Research and development must be at the heart of any industrial strategy, promoting links with our universities and technical colleges. We should recognise the need to plan for the skill sets we will need in the future, and to inspire our young people, both girls and boys, with the challenge and excitement of pursuing a career in our world industry.
We have had the national shipbuilding strategy and the combat air strategy is being developed, so rather than just the defence industrial refresh it would make perfect sense for the Government to come forward with an overarching and far-reaching defence industrial strategy that would give industry the certainty it requires.
I do not know whether my hon. Friend has noticed, but Rolls-Royce is in the market to sell off its industrial marine division—the power generation division. Nobody knows yet who is likely to buy it, but it is likely that once again our defence is going to be manufactured abroad instead of being protected in this country.
My hon. Friend makes a very good point about the need for certainty and long-term planning, so we can give business the confidence to invest here.
As well as ensuring that our armed forces have the very best equipment, a core objective of our defence industrial strategy should be to promote our national prosperity. We can only do that properly if we factor in the true value of defence contracts to the UK economy. Buying British is not just about the basic fact that a UK-based company will pay UK tax; it is also about the broader economic and social benefits, and the value of the skills and apprenticeships that the industry creates.
Indeed—at least that amount.
Reports by Oxford Economics highlight that the UK defence industry has an output multiplier of 2.3, meaning that £100 million in UK industry generates some £230 million to the UK economy. Its reports also highlight that each additional job created in the manufacturing element of the defence industry results in a further 1.8 jobs being created in the wider economy.
At present, the Government do not routinely factor in these wider socioeconomic values when making a procurement decision. We on the Labour Benches believe that to be a serious mistake. It is particularly anomalous when companies that bid with the Ministry of Defence are quite used to having to set out the socioeconomic value of contracts when bidding with Governments of other countries. Labour is committed to expanding the definition of good value to include wider employment, industrial or economic factors when making procurement decisions.
I am listening very attentively to what the hon. Lady is saying. I am sure she will be aware that in March this year HM Treasury published, after a seven year review, a new definition of managing public money, which specifically allows, under UK procurement rules, for the concept of social value to be taken into account. She is therefore asking the Government to do something they have already decided to.
I thank the hon. Gentleman for his intervention and I congratulate him on his excellent report, which he presented on Monday. I note that in it he recommends that UK prosperity should be taken into account in all major procurement decisions. I welcome that statement.
Indeed. When we speak to defence contractors, we find it is a sad fact that they are not being required to put those details into the bids they make. We very much hope to see that change. I hope that this is an urgent step on that way. The approach has been endorsed by the Defence Committee and has received the support of the trade body, ADS, as well as the defence trade unions such as Unite, GMB and Prospect.
The contract for the fleet solid support ships would bring immense value to this country if it were awarded to a UK bidder. Our carriers, frigates and destroyers will, of course, always be built in the UK, but with ships such as the fleet solid support vessels, the Government have a choice to make, and Labour Members believe that they are making the wrong one by choosing to put this order out to international competition. I know that some in the Conservative party like to blame everything on the European Union, but the fact is that the Government would be able to procure these ships in the UK under existing EU law, and there are compelling reasons for doing so. The GMB trade union has estimated that the ships would support 6,700 jobs if they were built in UK yards and up to £285 million of the £800 million potential UK spend would be returned to the Treasury through taxation.
The case for buying British is clear, and it would be a betrayal of our UK workers if this contract were allowed to go overseas, so we need to question what is really driving Ministers to put this out to overseas bidders. Perhaps it is the view that there will be a lower price tag for the MOD. We all want to get the best value for money, and we are aware of the difficulties that the MOD is having in balancing its budget, but this short-sighted, narrow, silo mentality about what might look good on the MOD’s balance sheet ignores both the benefits to the UK economy of building the ships in Britain and the costs of not doing so. We as taxpayers all want to see value for our money, and taxpayers up and down the country would far rather see that money spent on supporting skilled jobs for workers here in the UK than see it spent abroad, knowing that some 30% of the money spent on wages will come back directly to the Treasury as taxation, and that the spending power of those workers and their families will sustain local businesses in their communities.
I am very sympathetic to the case that the hon. Lady is making, but the consequence of going down the route that she recommends, and which I am inclined to support, is that the black hole in the defence equipment budget will become even greater. If we accept that there needs to be an uplift in the defence budget to be able to make this sort of investment and get the long-term gains that she describes, will she confirm that her party’s policy is to support an increase in the defence budget?
As I just outlined, it is extremely important that we take into account the way that the money can be brought back into the Treasury, and I very much hope that the right hon. Gentleman’s message will be well understood by Government Front Benchers.
I will make a bit of progress. As taxpayers, we all want to see value for our money, but we recognise the consequences if we do not spend the money in the UK—the immediate impact on workers and their families, with workers unemployed or able only to find much lower-paid work, leaving them and their families much more reliant on social security payments and tax credits. All that is a cost to the taxpayer and, sadly, there are all too often the hidden costs of the increased risk of mental health problems and family break-up. While workers and their families will take the hardest hit, the wider consequences will be far-reaching and long term. Shipyards will close. We will lose a skilled workforce and a generation of apprentices.
If UK companies do not win these contracts, they will have less money to spend on research and development, and that bodes ill for the future. We have to stay ahead in this game to stay in the game. We know that UK-based companies are interested in putting in a bid, but they will be less inclined to if they think that this order will simply be handed overseas, as happened with the MARS—Military Afloat Reach and Sustainability—tankers. Bidding is a lengthy and expensive process, and companies understandably do not want to take that risk if there is no chance that they will succeed. Awarding this contract to an overseas manufacturer would be particularly galling when we note the subsidies, both direct and indirect, that benefit many foreign yards.
To those who argue that UK companies should simply compete on a level playing field with international bidders, I say that the point is that currently the field is simply not level. For example, the South Korean shipbuilding industry has been the subject of a great deal of criticism for the level of state aid it receives. Shipbuilding is a significant element of the country’s economy, and state-run lenders have injected billions of dollars into the industry. The Confederation of Shipbuilding and Engineering Unions has found that German yards benefit from targeted research and development, from funds for redeveloping and upgrading yards and from regional development funding, while significant potential bidders in Italy, France and Spain are owned in whole or part by their respective Governments. Rather than allowing this valuable contract to disappear overseas, the Government should do the right thing and put UK yards and workers first.
Of course, in this global marketplace, I recognise that not every contract can or should be delivered in the UK, and where we buy from abroad or work in collaboration with allies to develop assets, we should prioritise work-share agreements to create jobs and boost growth in the UK.
I cannot allow that to stand. I was in post when the P-8 Poseidon contract was placed, and an integral part of the relationship with Boeing was an understanding, now being fulfilled through contracts, that it would make a significant investment in RAF Lossiemouth. As a result, £400 million is now going into that base, in part to support and maintain those aircraft and other aircraft operated by our allies. Those aircraft will be coming here to the UK to be maintained and serviced. That means UK jobs and UK investment.
The argument from the hon. Member for Ludlow (Mr Dunne), whom I congratulate on his report, does not hold water. Of course, if we are buying these planes, we will need maintenance facilities, and if that is being done by industry, industry will provide those facilities, but they are service facilities for the RAF, and there might even be work from abroad. Where, though, are these planes being manufactured? They are being manufactured in the United States, with very little return of work coming to the UK. They have been allowed to get away with a very cheap deal.
As the Member of Parliament for Moray, which is home to RAF Lossiemouth, I have to take exception to the points made from the Labour Benches. This is a major investment—£400 million and hundreds of new jobs—in Moray and Scotland and is welcomed locally by every man, woman and child. They will look very poorly at the Labour party today trying to say it is not good enough for the area.
The hon. Member for Moray (Douglas Ross) talks about the benefits to his constituency, but what about the people who live near Woodford, the BAE Systems site in Manchester, who in 2010 watched as the Nimrod MRA4 programme, 94% complete, was smashed up by JCBs and Britain’s capacity to build large fixed-wing aircraft permanently destroyed? Was that not the total destruction of British industrial capability—something we are trying to avoid in this debate today?
My hon. Friend makes an excellent point, and now I shall conclude, as I am sure that hon. Members are thinking about what they will be watching later this evening.
When I was very young, I remember not only the excitement of England winning the World cup in 1966, but the I’m Backing Britain campaign. Before they go off to support the English football team this evening, I urge Members from across the House to recognise that the order for the fleet solid support ships represents a prime example of one that can and should be awarded here. I urge Members to back British industry and to vote to build them in Britain.
That was an introduction and a half. Thank you very much, Madam Deputy Speaker: it is a real pleasure to take part in this important debate.
Looking at the motion, I see much on which we are in agreement, and looking around the Chamber, I see many of the usual characters who wholly support not only the armed forces and the armed forces industry, but our defence posture. Defence investment is important, and my view—I do not know whether it is related to what may happen later in the day—is that we need to spread that message more widely to our other parliamentary colleagues.
Let me approach the issue from two perspectives. First, why must we invest in our maritime capability? Why, from a British perspective, is it important for us to do that? Secondly, in aiming to meet whatever is our ambition and create whatever architecture we wish to create, how can we most wisely spend the taxpayer’s money on defence? It is interesting that the hon. Member for Llanelli (Nia Griffith) focused on that as well. What is a wise use of taxpayers’ money—or should we automatically give it to shipbuilders in the United Kingdom with no questions asked? That, I think, is at the core of the debate: the issue of where the line should be drawn.
Let me step back from the details for a second, and reflect on the importance of the security and prosperity of our island nation in the context of the seas. For centuries our world-renowned Royal Navy has protected our shores and our people, and has safeguarded our interests. As we mark the end of the first world war, we remember that in that war—and, indeed, in the second world war as well—it was the aircraft carriers, the frigates, the destroyers, and the other warships built by men and women across the country that kept our fortunes afloat.
Today, as the hon. Lady said, our Royal Navy is busier than ever, defending our trade routes, leading the fight against global terror, protecting shipping lanes from piracy, tackling illegal migration in the Mediterranean, and, obviously, playing a leading role in NATO’s maritime capability. Its activities have ranged from war-fighting to nation-building to peacekeeping, and from interdiction to littoral work—and humanitarian work, as we saw in the Caribbean last summer. In a post-Brexit world, however, there is an ever greater need for us to project our influence and lead by example in retaining the most sophisticated and potent Navy in Europe, to help shape the world around us and to keep ourselves and others safe.
I make no apology for raising the wider issue of defence spending—which has already been raised by the Chairman of the Defence Committee, my right hon. Friend the Member for New Forest East (Dr Lewis)—at the very time when the same issue is being discussed more widely at the NATO summit. The Defence Secretary has succeeded in elevating the need for increased defence investment as threats diversify and become ever more complex. As I said in Defence questions on Monday,
“We are entering a phenomenon of constant confrontation by state and non-state actors.”—[Official Report, 9 July 2018; Vol. 644, c. 691.]
We are not in a phase of war, and we are not in a phase of peace.
Let us remind ourselves of the very first line of the national security strategy and strategic defence and security review:
“Our national security depends on our economic security, and vice versa.”
It is important for us to persuade all members of all parties that we must invest, because if we fail to do so, our capabilities will diminish at the very time threats are increasing. We need to convey that message to the Treasury. Let me repeat that as the world becomes more dangerous, our post-Brexit economy is ever more reliant on security for access to our international markets. Some 95% of our trade still goes by sea, and we need to protect our interests there.
If the hon. Gentleman will let me finish this peroration, I will of course give way, just to re-energise myself. If we allow that trade to be affected by the changes made in the world around us by nations that choose to breach the rules we helped set up after the second world war, there will not be any money for any Government Departments, let alone the MOD. I hope we can join together to persuade more of our colleagues about that, and not just the stalwarts and defence fans, so to speak, who are here today.
I apologise for interrupting the Minister’s flow. I do not think any Member on either side of the House would disagree about the importance of the Royal Navy and the incredible job it does, but our point on this side of the House—I suspect shared by some on the Government Benches—is that shipbuilding is a vital strategic industry. There are many benefits apart from producing the very best ships in the world, such as maintaining employment and a skills base that could itself generate more economic activity. I hope the Minister will take that into account, and not least the importance of the supply chain.
There is nothing in that that I would disagree with; the hon. Gentleman is absolutely right. I will come on to what we are doing to promote Royal Navy ships; we will come on to the core fact of what is a Royal Navy ship and what is a fleet auxiliary ship, which again goes to the heart of the difference in how these different types of ship are procured.
Notwithstanding what has just been said, surely the Minister will accept that whenever we buy a Royal Navy warship, an auxiliary ship, an aircraft or whatever abroad, we never own all the intellectual property associated with that product. We are buying F-35s, which are splendid aircraft, but we will never know the fine details of the box of tricks that makes them work, and that is a disadvantage to our country.
I will move on to our maritime capability and our procurement process, but first please allow me to finish the bigger case of why it is important that we invest here.
I am making the point that although we must persuade Members of Parliament, we also need to persuade the nation. This is the same nation that enjoyed the fly-past yesterday and that expects us to step forward as a global influencer, but I am afraid is perhaps worryingly naive about the need to invest, because that is not a doorstep issue; it does not come up very much on the election circuit compared with health, education or transport. I think all Members would accept that point.
Our defence posture matters; it is part of our national identity. It allows us to sit with authority at the international top table and help shape global events. Other nations and allies look to us; they look to Britain to step forward, and to lead in the air, on land, on the sea and now on the cyber-plane as well. That ambition could be lost in a generation if we do not continue to invest; that capability, and desire to step forward, could be lost.
When we look at the current challenges facing Europe, the middle east and parts of Africa, we see that we are the best in Europe in terms of security, military capability, and intelligence and policing. We have an opportunity to leverage that position of strength as we craft a new post-Brexit relationship with our European allies and take a leading role in NATO, but we can only realistically do that with a sensible increase in our defence spending, which includes investment in ships.
The Minister is right to say we need to build support not only across this Chamber among Members who are not present, but from across the nation, about the imperative benefits associated with investment in defence. I hope the Minister agrees that one of the ways to do that is by injecting a sense of national pride in our defence industry: by increasing the connectivity between our yards and our people, and between our people and their representatives. In Harland and Wolff in east Belfast that is exactly what we expect. It wants to be part of this investment and of this country’s defence infrastructure, and it looks forward to playing its part and building its support locally.
During my time as a Member of Parliament I have seen a change in the posture of the Royal Navy that we can all be proud of. What is the Type 45? It is the best in its class. What is the Type 26? It will be the best in its class. What is the Type 31? It is a change in approach to modular design, which will be exactly what we need for export. This is what Britain is doing. We invented the aircraft carrier; we were the ones who first put that concept together. That innovation that is inherent in our DNA is what is allowing us to do exactly what the hon. Gentleman says.
I have hinted that I will come to that in a second, but there is a distinction between fleet support ships that employ civilians and Royal Navy ships that employ Royal Navy personnel. There is a distinction between the two from a security perspective.
Going back to the point about value for money for the taxpayer, the Defence Secretary, the Procurement Minister and I all want to ensure that we are able to utilise the advanced skill sets in our defence industry across the UK, but the bottom line has to be value for money. Let us take as an example the ships that were recently purchased in Korea. The price was half the British value. Is the hon. Member for Llanelli saying that she would pay double the price for the same auxiliary support ships?
The Minister needs to take into consideration the fact that something like 36% of that spend would immediately come back to the Treasury in taxation. There would also be a knock-on effect for all the small businesses that would benefit from that money being spent out into the local economy. We would also have to take into account the cost of social security if those people were unemployed, as well as the disastrous cost of losing our shipbuilding industry altogether. Does he recognise that if we do not invest now to create a drum beat of orders, we could see the shipbuilding industry going the same way that the Tories let the coalmining industry go?
I am suddenly very popular, but may I just finish answering that point? Then perhaps we can go round houses.
This is a serious point. The hon. Lady did not answer the question on whether she would endorse purchasing a British-built ship that cost twice the amount as one built elsewhere. I hear what she says about the knock-on impacts for small and medium-sized businesses and so on, but a third of the money being spent comes back to Britain anyway. That is part of the contract that has been secured by the Procurement Minister. So in fact, we are already doing as she says, but taxpayers are paying half the price that they would have been paying had we purchased something from Britain. That is the situation that we face, and without wishing to sound too political, that is the difference between us on the Government Benches, who want to be fiscally responsible with taxpayers’ money, and those who simply want to pay for anything. I absolutely want it to be British, but we have to have value for money. Also, it is wrong to suggest that there is no shipbuilding capacity coming through. I have just mentioned the aircraft carrier, the Type 26 and the Type 45, in which there is continuing interest, and we also have the Type 31 and the offshore patrol vessels that are coming through. So there is plenty out there to keep our capability alive and busy.
Will the Minister confirm that the Korean shipbuilder that took this contract, DSME, underbid and actually lost significant sums of money on the contract? It was not a fair contract, and because of its general business practices, it came very close to going bankrupt and had to be bailed out.
I am glad that the right hon. Gentleman put it like that, because I was worried that he was going to say that state aid had been involved. I am sure that he would not suggest that that was the case, because I know him better than that, even though that was hinted at by those on his Front Bench. That was the commercial decision that the company took, but we are left in a situation where Britain is getting value for the taxpayer’s money.
The Minister is talking complete and utter nonsense. On the military afloat reach and sustainability contract, there was no UK bid, and the reason for that was that the industry was told that the contract was going abroad. As my right hon. Friend the Member for Warley has just said, the Korean bid was underbid and basically bankrolled by the South Korean Government.
There was not.
I would like to move on, so I am going to make some progress and perhaps invite the Minister responsible for procurement, who will be concluding the debate, to go into the detail of the bid. If Labour is taking a position of only taking British offers and not looking abroad, it is not taking taxpayer value for money into consideration.
Does the Minister agree that the picture painted by Labour Members is rather inaccurate? Due to the remarkable scale of investment, not least in our new Type 26 fleet, the picture is one of extraordinary investment activity, so to portray the industry as being on its knees is, frankly, a gross mischaracterisation.
I am grateful to my hon. Friend, but I want to move on to the second question that I posed, which is how we can best meet the ambition of optimising our industry’s capabilities while spending taxpayers’ money wisely.
The UK is a world leader in the defence sector. In 2016, the UK defence sector had a turnover of £23 billion, £5.9 billion of which was export orders. The MOD is the sector’s most important customer, spending £18.7 billion with the UK industry and directly supporting 123,000 jobs in every part of the UK. Indeed, my hon. Friend the Member for Ludlow (Mr Dunne), in his report that was published on Monday, shines further light on the important contribution that defence makes UK prosperity, and I pay credit to him for his work. The report shows that there is more that we can do, which should be welcomed by both sides of the House.
I am grateful for that compliment. The Minister is describing an interesting picture. Does he agree that aviation and aerospace are an important part of that picture? Does he also agree that activities in and around Farnborough, including the international airshow, are vital? Will he confirm that he will be attending the airshow next week? If he is not, I will happily arrange that for him.
We have wandered away from ships a little, but my hon. Friend is right. I pay tribute to the RAF for its event yesterday, and for what it has done and continues to do. The Royal International Air Tattoo starts at RAF Fairford on Friday, and we have the Farnborough airshow next week, where we will be launching our air strategy, based on the same principles as for shipping, which will be exciting.
Returning to ships and the role of the maritime sector, we should remind ourselves of the significant changes to the Royal Navy fleet. We have two incredible aircraft carriers coming into service, a new generation of Dreadnought-class submarines, the Type 45 destroyers—the most advanced in the world—and the new Type 26 global combat ships. We also have the Type 31e frigates—e for export—which have deliberately been designed with a modular concept. Depending on the export need, which could be interdiction, surface support or humanitarian purposes, its parts can be interchanged simply to adapt to the local requirement. This is an exciting time, and all the ships will be built in the United Kingdom.[Official Report, 24 July 2018, Vol. 645, c. 7MC.]
To achieve our ambitions, we need a strong shipbuilding industry as part of the wider maritime sector. As the Opposition spokeswoman said, more than 100,000 people work in this country’s maritime and marine sectors, including in the shipyards that supply parts and support equipment to keep the great industry alive.
The Minister refers to shipyards. He might be aware that a deal was done in 2013 so that, in return for closing down operations in Portsmouth, capital investment would be made on the Clyde to make it a world-class centre of shipbuilding expertise, but that deal was never followed through with. He talks about creating a world-class industry, so why has he failed to follow through on the investment proposals that would make the Clyde world class and restore that capability?
We are investing both in the Clyde and in Portsmouth. Looking back over the past few decades, let us be honest that although we have world-class shipbuilding capability, efficiency has not been what it could be. Successive Governments could have done better—we put up our hands up to that—which was why it was all the more important to create a shipbuilding strategy. We commissioned John Parker’s report so that we would be able to understand—
Does the Minister recognise that the Parker report very clearly mentions having a “drumbeat” of orders? That is vital to the industry so that we do not lose skills, so that we do not fall behind on R&D and so that we can remain in the game. Does he agree that that is important and that these ships could contribute to that drumbeat of orders?
I do not disagree. I try to be less partisan than others who jump up at the Dispatch Box, and I absolutely agree with the hon. Lady about the importance of that drumbeat of orders, but it should not come at any price. We need to make sure it blends with what is built for the Royal Navy and for the Royal Fleet Auxiliary. We have accepted every single recommendation made by John Parker, and we thank him for his very wise report.
My right hon. Friend has been generous about my report, which was published on Monday, and I am grateful for the other comments about the report by Members on both sides of the House. On page 53 of the report, I refer to the fleet solid support ship and make the point that the fact that we are currently a member of the European Union means that we are precluded from taking advantage of the article 346 exemption to require that ship to be built in the UK. One of my recommendations is that we should take advantage of the opportunity of Brexit to consider the opportunity, after we leave the EU on 29 March 2019, to build UK content into our own procurement rules, which might allow us to change the position, but we cannot do that today.
I suggest that the right hon. Gentleman reads the report by my hon. Friend the Member for Ludlow to understand the full picture. My hon. Friend is correct that EU regulations provide guidance on building those ships. The regulations do not apply to royal naval ships because, from a security perspective, every sovereign nation is allowed to bypass them, but the rules absolutely apply to non-royal naval ships—as in Royal Fleet Auxiliary ships—that employ civilians on board. I encourage hon. Members to read the report before judging what my hon. Friend has just said.
Moving back to what I was saying, we must have an honest debate about what is happening, which is why we need to develop a modern, efficient, productive and competitive marine sector that allows us to build on the work that has been done on the Clyde, in the north, in Belfast, in Barrow, in the north-east, in the north-west and in the south-west of England. We have incredible capability, and I am pleased to see so many hon. Members representing constituencies in those areas in the Chamber today.
Our new shipbuilding strategy sets out exactly how we can achieve such a marine sector. We will continue to build Royal Navy ships only in the UK while encouraging international collaboration in harnessing open competition for other naval ships. Our new framework will ensure that the impact of UK prosperity will be considered as part of our procurement decisions. The 2015 strategic defence and security review created a new security objective: promoting our prosperity. Competition and strategic choice remain at the heart of our approach, but we recognise that there are several different models for working successfully with the industry, and we need to take further steps to bolster that and make the right decisions to enable a strong partnership between the Government and industry.[Official Report, 23 July 2018, Vol. 645, c. 7MC.]
That is part of the whole Government approach, spearheaded by the national industrial strategy, with its mutually reinforcing focus on driving productivity and supporting innovation, which provides a strong and clear policy framework in which industry can invest and grow. Key to that is how defence procurement might build economic value by strengthening UK productivity and industrial capability, including at a local level, and boosting exports sustainably. We recognise that responsible exports are now widely accepted as having a part to play in our wider national defence and prosperity objective. They are considered to be an opportunity, not a burden.
Sir John Parker’s 2016 independent review made a series of recommendations about improvements we can make, and, as I said, I am pleased that we will be accepting all of them. He did place emphasis on the dysfunctional relationships between government and industry. Old ships were retained in service well beyond their service date, with all the attendant high costs, and it is important that that changes. So our new strategy is founded on three pillars. The first is better planning, giving industry greater certainty and predictability. We are providing a 30-year Royal Navy shipbuilding masterplan to guide all future naval shipbuilding decisions, and to document the number and types of ships in which we will invest over the next three decades.
The second pillar is a new approach to design and construction. We want to challenge naval standards and introduce new ones, forcing through advances in design, in new materials such as composites, and in manufacturing methods. Our new carriers are a prime example of that. They are built in blocks, with parts built in different parts of Britain, drawing on the expertise of 10,000 people, and being brought together from centres of excellence from across the country. Thirdly, we want to focus on building exports, where there is an opportunity, as the Type 31 will be the first frigate for export since the 1970s. We know that more sales can cut costs in procurement over time and give us the potential to buy even more cutting-edge ships.[Official Report, 24 July 2018, Vol. 645, c. 8MC.]
For now, for reasons of national security, the shipbuilding strategy sets out that warships will be built and integrated in the UK via competition between UK shipyards. However, for the purposes of shipbuilding only, the national shipbuilding strategy defines warships as destroyers, frigates and aircraft carriers. All other naval ships, including the Royal Fleet Auxiliary ships, as well as other Royal Navy manned ships, such as patrol, mine countermeasures, hydrographic and amphibious ships, will be subject to open competition—that means international competition. That remains where the difference lies between us and the Opposition, but it is the cornerstone of our defence procurement policy. I remind the hon. Member for Llanelli that she talked repeatedly about value for the taxpayer, and it is important we understand that. I hope that there is a compromise whereby where we want to and can, we will utilise British shipbuilding capability, but when it comes in at twice the cost of an overseas opportunity, we will have to be very careful about which decision we make.
Thank you, Mr Deputy Speaker.
I may have misunderstood the Minister, and I know it is not the custom to ask a question to which one does not know the answer, but I think he said that royal naval ships were confined to aircraft carriers, frigates and destroyers. Would that not also apply to any replacement amphibious craft that we might need?[Official Report, 24 July 2018, Vol. 645, c. 8MC.]
The GMB commissioned a Survation survey that found that 74% of people want these ships to be built in this country. Do not public opinion and the pride that people would feel if the ships were built here matter as much as value for money?
I can only say that I hope that 100% of people would like ships to be built in the UK, but I also think that 100% of fiscally responsible people would like value for taxpayers’ money. That is the difference that this debate will illustrate.
Since the strategy was launched in 2017, the Government have worked closely with our partners in industry and made significant progress on our commitments under the shipbuilding strategy, not least through our continued investment in five River class offshore patrol vessels that are being built on the Clyde. Those ships have safeguarded industrial capability through a contract worth around £635 million, which is exactly what the shadow Secretary of State wants to see. We must make sure that there is this drumbeat of work, not only so that none of the shipyards face closure, but because it is essential so that we can continue to act when we require ships to be built for the Royal Navy. The first batch of the cutting-edge Type 26 frigates that are being built under the £3.7 billion contract with BAE Systems are also being built on the Clyde.
The Minister mentions the River class batch 2, which was primarily designed to maintain production at Govan shipyard until the Type 26 was of sufficient maturity to begin construction. Does he accept that the only reason why Govan shipyard is open today is because a Royal Fleet Auxiliary order for the Wave Ruler was placed there in 1999 to keep the yard open until the Type 45 build could start? The only reason why that yard exists today is because the Government placed that Royal Fleet Auxiliary order with Govan, and that is exactly what we are arguing for today: to maintain these builds in the UK to maintain industrial capability.
The hon. Gentleman sort of makes my point. We need to make sure that we bear in mind not only prosperity and British capability, but value for money for the taxpayer.
The Type 26 will offer a leading anti-submarine warfare capability for its planned 25-year service life, providing critical protection to the continuous at-sea deterrent and maritime task groups. We are currently in dialogue with industry on the strategy’s flagship Type 31 frigate programme, which is worth £1.25 billion for five modern warships. They will be flexible and adaptable in design, as I said earlier, and part of a balanced Royal Navy fleet that will be deployed across operations in support of the UK’s maritime task group.
The shadow Secretary of State mentioned the launch of our fleet solid support ships programme, which is procuring vessels for the Royal Fleet Auxiliary through international competition. They will provide munitions, stores and provisions to support maritime and amphibious-based task groups at sea.
On exports, we are delighted that Australia is considering the Type 26 global combat ship and BAE as the preferred tenderer for its future frigate programme. The consequence of our creating something that other countries want is that further countries have been prompted to look carefully at the Type 26. That is exactly what is happening in our discussions with Canada. This is exactly where we want to go: we want to make sure that we have the capability to build something that we can export, not just something to keep shipyards open. That is critical. The UK’s long-term commitment to the Type 26, which is currently being constructed for the Royal Navy in Glasgow, was an important consideration for Australia in its decision-making process. The fact that we continue to invest in it showed our continued confidence in the Type 26, which we believe is the world’s most advanced, capable and globally deployable anti-submarine warfare frigate.
In conclusion—[Interruption.] I could go on, if Members would like. I hope that the House will join me in recognising the important role that the defence industry plays in helping us to meet our ambitions and commitments, ensuring that we continue to deliver cutting-edge, battle-winning capability for our armed forces for years to come.
As an immoveable Defence Committee commitment means that I have to leave this debate for a period, though I hope to catch Mr Deputy Speaker’s eye later on, I would not like the Minister to sit down without knowing how much we on both sides of this House appreciate that he has been prepared to speak out as strongly as he has in favour of an increase in the defence budget. I hope that he will continue to press the Opposition to operate on a bipartisan basis in this way, because if we want to invest to keep shipyards open that might otherwise close, surely the logic is that the defence budget must increase.
My right hon. Friend is very kind in his words. May I reciprocate by saying that he has done much work to keep this debate alive? The Defence Secretary is absolutely passionate about this. As I said earlier, we need to share this further, beyond defence colleagues and beyond those who naturally find this important and understand it or indeed who have constituencies that are connected with the armed forces. This is something on which we need to engage with the nation. We need to recognise that it is part of our DNA to be strong, to be firm and to be leaders in Europe and on the international stage itself. I hope that that message is being shared in NATO at the summit now.
I am grateful to my right hon. Friend for giving way. Given that, at the NATO summit, President Trump has called on all NATO members to invest 4% of GDP on defence, does my right hon. Friend agree that 3% from the United Kingdom is the very least that we should be investing in our national security?
Before wandering too far down that road, let me say that this is just too important for us to play a guessing game and try to thump out numbers of GDP advancement. Other Departments will just turn around and say, “Well, I want a bit more of that for my Department as well.” We must make the case; we must spell out exactly what the money would be spent on, what savings would be made and what efficiencies we can provide inside defence itself. Therefore, whether the figure is 4%, 3% or 2.5%, the purpose of the defence modernisation programme is to give us the detail on what we need to do for our air, land and sea; what we need to do to upgrade in all phases of war; what we need to do in the new areas of complex weapons, cyber-security and protection of space for fear of hollowing out our conventional capability.
In conclusion, this Government have a responsibility to obtain the right capabilities for our armed forces. However, as a customer, we must ensure that this represents value for money for the taxpayer. Competition is at the heart of our approach. Our shipbuilding strategy is a pathfinder and exemplifies many aspects of our approach, set out in the Government’s policy framework, which includes an ambition to transform the procurement of naval ships; the importance of making the UK’s maritime industry more competitive; investment in the Royal Navy fleet; a commitment to exports; and a plan to boost innovation, skills, jobs and productivity across the UK.
We are rightly proud of all those who serve our country. We have a duty to look after them and protect them. That includes procuring the best possible equipment, which allows us to remain a tier 1 nation, leverage our industrial capacity and produce cutting-edge equipment for us and for us to export.
Because of the mechanics of the Defence Committee, I, rather than the Under-Secretary of State for Defence, my hon. Friend the Member for Aberconwy (Guto Bebb), stepped forward to open this debate. However, defence procurement is his brief, and it would make more sense for him to give a comprehensive reply on this very subject as he is concluding this debate.
The matter is now on the record for it to be picked up—[Interruption.] Hot potatoes!
I now have to announce the result of today’s deferred Division, which was subject to a double majority vote under Standing Order No. 83Q, in respect of the Question relating to the draft Renewables Obligation (Amendment) Order. The Ayes were 299 and the Noes were 211. In respect of the same Question among those Members from qualifying constituencies in England and Wales, the Ayes were 282 and the Noes were 201, so the Ayes have it.
[The Division list is published at the end of today’s debates.]
After the Minister’s interesting and generous 40-minute speech, I will cut my remarks short. [Hon. Members: “No!”] Oh, don’t tempt me. I will perhaps not be as generous as the Minister, to allow colleagues, particularly those with constituency interests, to speak. [Interruption.] With the upcoming England game, I am happy to detain hon. Members, if that is really what they want me to do. In the spirit with which the shadow Secretary of State opened the debate, the phrase “It’s coming home” does not at all stick in my throat. In this debate, I think that we should stick to the phrase, “It ought to be coming home.”
This debate takes place on the day and against the backdrop of the Prime Minister being at the NATO summit in Europe. History has a strange habit of repeating itself; when the last female Prime Minister was at an important summit in Europe, her Back Benchers were concocting a plan to remove her as party leader and as Prime Minister. I can only assume that the current Prime Minister is hoping that history is a bit kinder to her as the summit progresses today. But, of course, it is shaping up to repeat itself, because this has all the hallmarks of Westminster again selling out shipbuilding across the United Kingdom.
The Government seem intent to ignore much of what the shadow Secretary of State has outlined and, I am sure, much that will be adumbrated by other colleagues as the afternoon progresses. The Government are ignoring the real value to the taxpayer, ignoring the craft and the skill of shipbuilders across the UK, and ignoring what is in our own economic, political and national security interests. Given that the Department has a black hole of up to £20 billion, I would have thought that this was something of which the Government wanted to take real cognisance.
I do not level the following accusation at either Minister on the Treasury Bench right now, but when the Government have manoeuvred for self-interest all week long—and it is only Wednesday—now would be a good time to switch around, do the right thing and confirm that the fleet support ships will be built here in the UK. The financial benefits have already been outlined by colleagues outwith this place. The GMB union estimates that it can create and secure up to 6,500 jobs, including almost 2,000 in shipbuilding directly, that it can generate almost the best part of £300 million a year for the UK Exchequer and, as has been mentioned by the shadow Secretary of State, that it can provide a return of 36p for every pound that is spent.
I grew up in the town of Govan, which is represented by my hon. Friend the Member for Glasgow South West (Chris Stephens). I know what it is like to grow up in a town that relies on shipbuilding and to see it go almost to its knees, as it did in the early 1990s. I am sure that Glasgow MPs and colleagues from other shipbuilding constituencies will be damned if this Government are going to do that again.
Oh, I am going to come to that. The hon. Gentleman leapt up, but sometimes hon. Members’ interventions are best made from their seats; that might have been one of them.
On whether this is a civilian ship or a warship, my party is in agreement with the shadow Secretary of State. We think that the Government have the wrong definition and we do not believe that they are actually fulfilling their responsibilities as far as the Parker report is concerned. These ships are armed and, as has been mentioned, take part in counter-piracy and counter-narcotics missions.
I want to read a quote from the Under-Secretary of State, the hon. Member for Aberconwy (Guto Bebb), who is responsible for procurement. He said in a written answer on 27 April this year:
“The programme to deliver the Royal Fleet Auxiliary (RFA) Fleet Solid Support ships is in the Assessment Phase. We expect that the ships will be provided with a limited range of weapons and sensors for self-protection, most likely to include small arms, and close range guns such as Phalanx. The exact equipment provision has not yet been finalised but will remain consistent with the defensive measures provided to RFA vessels.”
On that definition, the Minister who has just spoken is getting it wrong.
May I invite the hon. Gentleman to visit a Royal Fleet Auxiliary ship to see the self-defence assets that are on board? That is allowed by law, given that civilians are working there. They are allowed to have a certain accommodation of capability, as he has just rolled out. That does not make such a vessel a royal naval warship or one that is doing any kinetic operations.
The Minister is free to invite me. Indeed, I look forward to getting a suggested date and time.
I am not the only one who is picking a fight with the Government over this; I am joined by all the Opposition parties in the Chamber today, the shipbuilders who will be producing these ships when the order finally comes through and the trade union movement that supports them.
I thank my hon. Friend. Is he aware of recent press releases from the Ministry of Defence in relation to the MARS contract that the Minister talked about earlier? One says:
“The tanker is expected in Falmouth next spring when she will start military customisation.”
My hon. Friend makes an important point that I am sure he will expand on later. [Interruption.] The Minister is most unkind. I sat and listened to him for 40 minutes and here I am being heckled as though he had taken five minutes. In fact, I am trying to remove parts of my speech to allow other colleagues to get in.
I want to come to some of the broken promises that the Conservatives have made with regard to shipbuilding in Scotland. Let us cast our minds back four years, when they were desperate—desperate—to buy off Scottish shipbuilding in the face of a potential vote for Scottish independence. They promised 14 Type 26 frigates to be built on the Clyde: a state-of-the-art, world-class frigate factory, which, amazingly, the previous Defence Secretary used to stand at the Dispatch Box and insist was there. My hon. Friend the Member for Glasgow South West was getting phone calls from journalists in Glasgow asking if they could go to see it. Indeed, I believe that a Labour Member—the hon. Member for Glasgow North East (Mr Sweeney)—actually took part in the design of the frigate factory. We were utterly sold out again by the Conservatives.
The current Chancellor, who at that time was the Defence Secretary, repeatedly told people in Scotland that staying in the UK was necessary to secure the future of shipbuilding in Scotland, but that promise was slashed. The guarantee of 14 Type 26 frigates was cut to eight, but we were promised five Type 31e’s to make up for the shortfall in numbers. Shipbuilders in Scotland—and indeed, I suspect, across the UK after this debate finishes—will not be trusting the Tories any time soon.
Finally, I want to read out a quote from the assistant general secretary—
No, because I have said I am going to allow other colleagues to get in.
The assistant general secretary of Unite, Mr Steve Turner, has said, and he is spot on:
“It would be a travesty if UK government ministers handed the economic windfall that building the new Fleet Solid Support ships brings to another country. The skills, knowledge and capability to design and build complex warships would be hollowed out and the clock turned back to the 1990s when the UK’s shipbuilding was on its knees. By 2020 25 per cent of spending on the UK’s defence equipment will be benefiting factories overseas rather than here in the UK. This is taxpayer money that can and should be spent here in the UK to the benefit of our economy. The government needs to back UK defence workers and our manufacturing industries by guaranteeing Royal Navy ships”.
If 25% of defence equipment spending being spent elsewhere around the world is this Government’s idea of a global Britain, then, frankly, count me out.
Thank you, Mr Deputy Speaker—it makes quite a change to be called early in a debate. It is a pleasure to follow the hon. Member for Glasgow South (Stewart Malcolm McDonald).
Some people will be wondering, “Why is the MP for Torbay rushing to speak in a shipbuilding debate? Surely the south-west is just about tourists, fishing, farmers and a few other bits.” Well, I know that the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) will be talking about the huge importance of the Devonport naval base. If we look at the figures from the House of Commons Library on employees in shipbuilding in 2016, we see that there are 12,000 in the south-west—even more than in Scotland or the north-west, which we might traditionally associate this industry with.
It is wonderful to note the new-found enthusiasm of the leader of the Labour party for the defence industry in the UK. I will leave those comments there, because I would rather we had a more positive debate, but it is certainly a contrast with some of the views he has expressed over the last three decades.
I will not, because I am conscious that there is quite a queue of Members wishing to speak. While this is an Opposition day debate, there are many Members with significant constituency interests who would like to speak.
In terms of the investment, it is welcome to see the new carriers coming into the fleet and the new Dreadnought-class submarines already under construction, which will hopefully be refitted in Devonport in the years to come, when they have entered the main service of the fleet. It is good to hear about other investment projects. We are seeing our Royal Navy become more competent and capable, with even more of a global reach. It is welcome to see that we are back in the South China seas, looking seriously at the British national interest out in the Pacific region.
While I have some sympathy with one or two parts of the motion, which I will come to, we have to think coherently about what we are saying. If we keep saying that these contracts—contracts that are not internationally recognised as something that should be national only—should be UK-only, we start to go down the path of the nonsense arguments that have been used in the steel industry in the United States. Donald Trump has used a nonsense argument about national security to put tariffs on Canadian and European steel. Let us be quite candid: Canada and the UK are some of the strongest allies of the United States. We share the most sensitive intelligence with one another, so it is an absolute nonsense to suggest that there is a national security angle to who sells steel from this country to the United States. That is where I part company with some of the Labour party’s arguments.
The part of the motion on procurement criteria is perfectly reasonable, and I will come to that, but if we keep saying that certain contracts must be UK-only, we begin a trend of protectionism. We cannot on the one hand rightly say that Donald Trump is talking absolute nonsense about steel, but on the other adopt a policy like that ourselves, potentially against foreign—
I thank the right hon. Gentleman for his intervention. Sadly for him, if he had waited until I got to a later part of my speech, he would have heard me talk about the Republic of Ireland, which is building naval ships at the Appledore shipyard in North Devon. He asked me to name one country in the world, and he has got one: the Republic of Ireland. I do not think I will take another intervention if knowledge is so limited that even our closest neighbour is not known about.
I just want to make a technical point. One reason why we are in this situation is that the Royal Fleet Auxiliary, as I mentioned, is made up of civilians. Most nations that have advanced naval capability have support vessels that are part of their naval fleet; it is for sovereign capability that those ships are built in that way. They do not have even the freedom to offer that elsewhere.
I thank the Minister for his intervention.
The part of the motion I have sympathy with is about ensuring that when we engage in procurement exercises the criteria take into account the wider benefits of using particular contractors. One of the things I am slightly concerned about is the idea that buying from the UK is something we are only going to do if we have a protectionist policy in place. As is shown by the example I have just been able to give of Babcock building ships for the Irish navy, our industry is perfectly capable of winning contracts in the international market. That is because of the quality of the teams, the quality of the product and the cutting-edge nature of some our technology. The recent Australian navy contract won by BAE, which has already been mentioned, will see the export of our knowledge and expertise—many small and medium-sized enterprises in the UK will get jobs and contracts out of that decision—and it is a sign of the quality we can offer.
It is almost doing down our industry if we stand up in the House and say to its potential international customers that the only reason we would want to buy from it is if we were required to do so, because that is simply not the case. Our industry has moved on hugely, and it is a cutting-edge and competitive one. It is disappointing that more Members have not got up and said that in this debate. I must say that Members on both sides of the House have implied there would be a massive cost to buying here in the UK, whereas we can actually win contracts overseas.
For me, it is clear that our industry can go out and compete properly for work, based on criteria that take into account the wider benefit of delivering a particular contract in a UK yard. I want to see these ships built in the UK and I want a yard to win that contract. I want us to be able to go out and say to our international competitors that that was done because our shipbuilding industry put in a good bid, at a good price, and could deliver exactly the right product and one that they would want as well. Let us be candid: if global Britain is about saying, “We want to sell everything to you, but there is no way we’re going to buy anything in return,” it will not be particularly successful.
In every trade deal we sign, we should rightly look to include protections against subsidy or state aid. In the same way that we would look to stop the dumping of steel via tariffs, we should make sure that a procurement contract deals with any nation wanting to subsidise it with a view to having an unfair competitive advantage. Again, fair criteria would deal with that.
The hon. Gentleman has perhaps heard of learning curves, which drive efficiency and productivity improvements, but that relies on a consistent drumbeat of work in order to hone efficiencies. His prescription militates exactly against such efficiencies being achieved.
I completely and utterly disagree. We can have such criteria, but I am saying that telling everyone else in the world “You can buy from us, but we aren’t going to buy from you” is absolute nonsense.
The idea that our industry is unable to drive efficiencies, deliver savings and, on contracts, deliver good-quality products at the right price for customers who want to buy them is actually doing down the industry. We did not win the contract at Appledore because the Irish navy said it could buy only from shipyards located on the Irish sea; we won it because it was right, Babcock having put in an excellent bid for the contract. Sadly, the right hon. Member for North Durham (Mr Jones) could not himself name one country that would bid for such a contract—for a naval ship—abroad.
For me, it is absolutely right that we encourage people to put bids together. It is right that we have criteria—this is where I have sympathy with a lot of the Labour motion—that look to deliver products from companies based in the UK. However, I would say to Members that we cannot come to the Chamber one day and whine about the nonsense arguments about the steel industry in the United States, and then pop back here the next day and use almost the same arguments, in another context, about one of our own industries.
I believe that our shipbuilding industry will benefit from the fact that we have a big supply line order for the Navy, and that it will strongly benefit from long-term maintenance as well. I am the son of dockyard worker. My father did not build ships, but he spent 37 and a half years maintaining and repairing them. It is quite sad to hear people dismiss the after-work as something rather minor, because it is actually a massive part of a contract. The vast majority of the money spent on the Dreadnought class will be in the maintenance and refitting of the submarines over their whole lifetimes.
For me, this debate is welcome, and we agree with elements of the motion. There will now be some pretence that I have argued such ships should be built abroad. No, I have argued that we need to have a consistent policy as a nation, because if we are not consistent, we cannot expect others to be consistent when they are dealing with our industries.
I will now bring us back to the real world of the defence procurement industry. The Minister wrapped himself in knots over article 346, and it very much reminded me of Madeleine Albright’s response to Robin Cook when he told her during the events in Kosovo, “Our lawyers say I can’t do that.” “Change your lawyers,” she said, “and get better legal advice.” As I will come on to later, that is what every other country does.
We are not saying that we do not want to work in partnership with other countries; we do, and we want to do so effectively, and not just for shipbuilding, which obviously we are focusing on today. We have to look forward. I am pleased that the Minister announced an announcement on the air strategy next week. In particular, we are hoping for an announcement on the future combat aircraft, which we hope will go ahead, and some indications of who we will be partnering with.
Many firms in Europe are concerned by attempts to exclude us from such developments, as we are already seeing with Galileo. It is a bit ironic, in the week of the Brexit crisis, that we are asking Ministers and the Ministry of Defence to be good Europeans—to behave like our European partners. However, the MOD seems to want to act like the three wise monkeys, keeping itself in blissful ignorance. It told the Defence Committee:
“The MoD does not hold information on how other countries apply EU Regulations for defence acquisition.”
Why the hell not? Why has it not asked those questions? Why would it not make those inquiries? It almost reminds me of the sign outside Balliol College during the student demonstrations of 1968: “Do not adjust your mind—reality is at fault.” The MOD does not even want to know the reality, in case it finds it uncomfortable.
France is a very good example. Let me make it clear that I regard France as an excellent defence partner, both militarily and in manufacturing. I congratulate the Minister for Defence Procurement on an excellent performance in front of a joint committee of our Defence Committee and that of the Assemblée Nationale. That is what we are talking about—co-operation and collaboration between our two defence industries.
Let us be very clear: the four auxiliary oilers were awarded with no competition, and furthermore the work was directed to the Saint-Nazaire yard, which was the yard that needed it. From my experience as a Minister, that is not uncommon in Europe, in defence and in many other areas, particularly transport. Not only will European countries decide that work goes to a company of their nationality, they will say which company it goes to.
My respected colleague, the right hon. Member for New Forest East (Dr Lewis), the Chair of the Defence Committee, talked about the percentage of the economy that is spent on defence. I am sorry that he is not here; perhaps he has another commitment. He ought to understand that the economic multiplier effect—the taxes that are paid, and the money that is spent, by the people who work in the yards that will build the vessels—would increase national gross domestic product, and with it the amount that went to defence.
If they have locations in the UK and there is a fair share of the work, that is absolutely right, but let us look at shipyards. I have mentioned what happens in France. The Berlin-class support ships are built in Germany. The Vulcano-class tanker support ships are built in Italy. The Cantabria-class oilers are built in Spain, and of course the United States has an absolutely rigid “buy American” policy as well. That is the real world, not the fantasy world of neo-liberal economics.
It is poignant that, in the week of the National Audit Office report on the failure of Carillion, in particular through under-pricing contracts and the Government encouraging it to go for “cheapest is best”, we are still being urged to adopt “cheapest is best”. Even within that, we do not drive a hard bargain. We do not insist, in work in the UK, on compensation.
The hon. Member for Moray (Douglas Ross) talked about maintenance work for maritime patrol aircraft. Maritime patrol aircraft will be maintained by the RAF and/or by industry, or in collaboration. That is not the issue. The real issue is what actual work there will be in manufacturing. Of course, maintenance is important, but that has to be done anyway. I refer not just to our shipyards and our aircraft factories, but to the UK’s very successful defence supply chain, particularly in engineering, electronics and, with regard to shipbuilding, our steel industry, which has been so dismissed by Ministers in the past.
This is also about maintaining the necessary flow of work, partly for that supply chain but also for our yards, in particular Rosyth. Rosyth shipyard will have a gap between the completion of HMS Prince of Wales, the second aircraft carrier in 2019, and the expected refit of HMS Queen Elizabeth, the first aircraft carrier, in 2030. Work on ships could keep the shipyard operational in between those dates and would therefore be very important in maintaining flow of work. We know how important that concept is, because of what happened in Barrow. There was a break in the drumbeat in the manufacture and production of nuclear submarines. The workforce drifted away to other industries and it cost a lot of money to recreate it.
As I said at the start, I urge the Minister to look at how other countries operate; to drive out the Treasury dogma, which has been imposed on the health service, transport and defence, that the cheapest and short-term is best; to think long-term; to work with industry, the trade unions and the supply chain. Back British industry. Back British shipyards. Back British steel.
Thank you, Mr Speaker. You will be pleased to hear that my speech is very short.
Today’s debate gives the Government a really simple and straightforward choice: they can show they are seriously committed to their promised renaissance in UK shipbuilding by ensuring that the contract for the new fleet solid support ships is tendered in the UK only, or they can refuse to accept our motion, proving that their commitment to a renaissance is nothing more than yet another in a long line of vacuous phrases from this Government.
I know the Government may argue the line that in their national shipbuilding strategy these ships are not warships and are therefore not safeguarded for UK construction, but in a written answer just this year the Minister for defence procurement said:
“We expect the ships will be provided with a limited range of weapons”.
He went on to explain weapons, such as small arms and close range guns. I am no arms expert, but that sounds to me like a ship that is equipped to defend itself from hostile attack. It is true, is it not, that under article 346 of the Lisbon treaty, our Government could, as other EU nations have, safeguard our own defence industries and tender these contracts in the UK.
I would stress to the Defence Secretary, if he was here, that if he is really in charge of his Department he could change that policy and set a new direction. Why can he not change this policy, adopted in the national shipbuilding strategy, so that ships such as these are safeguarded for UK construction? In short, it is a question of political will: whether he wants these ships and the associated economic benefits to impact here in the UK or abroad.
The arguments on the Labour Benches and among the public are clear. As my hon. Friend the Member for North Tyneside (Mary Glindon) said, the GMB union commissioned polling showing that 74% of people want the fleet solid support ships to be built in the UK. That could create up to 7,000 jobs, nearly 2,000 of which would be in our shipyards. An estimated nearly 5,000 jobs could be secured in the wider supply chain and the return to the taxpayer could be nearly £300 million. It would also ensure that vital skills, which are dying out in some areas, are passed on for future generations. Many of my family members have those skills. I am proud to come from a family of shipbuilders. My dad was a welder. My grandad, Herbert Lewell, and my uncle, Alan Lewell, were both painters. My other uncle, Alan Richardson, was a plater and my other grandad, John Henry Richardson, was a sheet metal worker. It is safe to say that the Tyne has some of the best shipbuilders in our country.
We are grafters in the north-east, but years of Tory Governments saw the decline of our yards, culminating eventually in the closure of the iconic Swan Hunter’s—in the constituency of my hon. Friend the Member for North Tyneside—where many of my family served their time. Not content with shutting down the pits, our other mainstay of employment, the Tory Government from 1979 to 1997 ripped the heart out of my community and damned children like me and others to years of watching their parents, wider family, friends and community struggle, ravaged by mass unemployment that created a vacuum of hope for generations.
My hon. Friend is making a really heartfelt speech. I remember the Save our Swans campaign, and as she has touched on, this was not just about unemployment. Those men who were able to get jobs had to go across the world and leave their families, and another way of decimating the community was removing people.
I thank my hon. Friend for that intervention. She is spot on. My dad spent a lot of time away—so much so that once when he came home, I did not even recognise him.
In 1981, 26,000 people were employed in shipbuilding and ship repair in the north-east. Today, that figure stands at a mere 525. My dad and the lads he worked with went from building ships, to repairing them, to being undercut by unscrupulous employers who exploited those coming from other EU states. Now many of the valuable skills that they could have passed on are dying out and fewer younger generations are looking to shipbuilding and ship repair as a career.
This Government have said that they want a strong shipbuilding industry, and that they want to inspire a new shipbuilding generation and transform today’s traditional shipbuilding regions into engines of economic growth. Today, they have an opportunity to put that rhetoric into action, delivering jobs and certainty for the future that will invigorate the communities in those regions. I just hope that they are listening.
I will try to make my speech go at the drumbeat of a Croatian polka rather than a Morris dance, Mr Speaker.
Let me start with something really positive: the early-day motion that I lodged last month on the contracts for the ships that we are talking about today has received cross-party support. I also say at the outset that Rosyth really needs the support of all 13 of the Tory MPs from Scottish constituencies, none of whom are in their place at the moment—I am sure that they will read it in Hansard—to support Scottish jobs and Scottish shipbuilding. They really have a good selling job to do to their party colleagues, and Scotland expects.
I am also grateful to the Chair of the Defence Committee, the right hon. Member for New Forest East (Dr Lewis), for asking a number of questions on the procurement process in a letter to the Defence Secretary on 8 May. These included really important points that had been raised by the trade unions on this issue. To give the trade unions their due, they have been exemplary in how they have conducted this campaign. The report that was commissioned, which was written by Francis Tusa, is a very good read indeed.
There is some concern about the timing of the award of the contracts, but I hope that the Minister, in summing up, will assure the House that there will be no further delay. I know that the workforce and the management at Babcock in Rosyth are good to go. That workforce have developed a reputation for dependability and bring huge contracts in on time and on budget, and what we need is a green light to get on with the job. The Minister referred earlier to our almost wanting to buy things that are cheap as chips. I remind the House, however, that the MARS tankers ran 18 months late. There is, then, a cost to procuring ships on that basis.
As the Minister knows, Rosyth dockyard is the only dry dock in the UK that can take the Queen Elizabeth class aircraft carriers. On the completion of HMS Prince of Wales in 2019, the yard will be rapidly drawn down and by 2021 will no longer have the capabilities it has today. The report published by the hon. Member for Ludlow (Mr Dunne) and commissioned by the Secretary of State makes the case for a strong, sustainable defence sector that adds to the overall prosperity of the nations of these islands. It is not just about Rosyth, however; a consortium bid, structured well enough, can work and be shared to create a win-win situation for many yards across these islands and spread the prosperity we all want to see.
The Queen Elizabeth class carriers will need to be refitted perhaps as early as 2025. The work we are discussing today for the fleet auxiliary ships should be used to keep Rosyth operational from 2020 to 2030. Can the Minister tell us when he sums up where the carriers will be refitted if Rosyth does not exist come that time? I do not know if he has paid a visit to Rosyth yet, but following a Prime Minister’s Question Time, I wrote to the Prime Minister, on 25 May, inviting her to visit to see at first hand the great job our West Fife workforce were capable of. I am sad to say that I am still waiting for a response. Both the Minister and the Prime Minister have an open and hospitable invitation—please come and see us!
It is hard for SNP Members to have this kind of debate without referencing the 2014 independence referendum, as it helps to set the context around the trust, promises and guarantees given to the people of Scotland in advance of that result. To recap, the Better Together campaign promised that 13 ships would be built on the Clyde at a state-of-the-art, world-class frigate factory in Glasgow, but that commitment has been repeatedly scaled back and delayed. In fact, the factory never materialised at all. The Chancellor of the Exchequer, then the Defence Secretary, repeatedly told the people of Scotland that staying in the UK was necessary to secure the future of Scotland’s shipbuilding industry. The UK Government then slashed the guarantee from 13 Type 26 frigates to eight but promised five Type 31e frigates to make up the shortfall. The Type 31e programme has now been opened up for yards across the UK to bid for, meaning that the work is not guaranteed to come to Scotland at all. As far as I can see, there is no budget line in the MOD’s budget to pay for the Type 31e frigates. I see the Minister smiling, so there must be an element of truth in what I say.
In addition, there is no mention of the frigate factory in Glasgow any more. The workers on the Clyde will want to know why this UK Government are reneging on their promises. The Tories cannot be trusted on shipbuilding, with their record of broken promises in Scotland. At least the Scottish Government are supporting Scottish shipbuilding with a £30 million loan to help Ferguson Marine diversify its business on the Clyde. Where is that kind of support from the UK Government?
In conclusion, the Government have previous on shipbuilding, but the Minister has a chance to make up for the broken promises of the past. I ask him to work with the industry in Scotland and across these islands to deliver on these contracts and to convince those in the Treasury that it makes good long-term sense, and would be sustainable, to award contracts to our yards. We live in a global world, but today of all days it is time for these contracts, these ships and these jobs to come home.
I will try to cut short my soaring rhetoric, Mr Speaker, and give you four succinct minutes.
I agreed with much of what the Minister said about the nature of the threat we face and the need for the UK to prepare for them, not just now and for the years ahead but for the decades ahead, and about the scale of the potential threat from Russia, as it rearms and seeks to spend £30 billion extra per year on defence. We do not know where China will be in 10 or 20 years, either, except that it will almost certainly deliver on its vision to become a super military power by 2050.
I agreed with all of that, but then, towards his conclusion, the Minister clearly stated that there was opposition between building these ships in the UK and economic efficiency, and he suggested that there was opposition between building them in the UK and maximising the Navy’s capabilities. That is just wrong. We need only look at the experience of Barrow shipyard and the submarine programme in the 1990s, which my right hon. Friend the Member for Warley (John Spellar) referred to so accurately.
Back in 1990 the Vanguard class of submarines came to an end, and the then Conservative Government did not introduce the Astute class programme so that there could be a seamless run-through. The result of that was not only mass unemployment, with more than 10,000 people made redundant, but all the social and economic costs which still scar the community now. It made the whole business of shipbuilding in the United Kingdom far less efficient, and it made us far less capable. Because of the delay and because of the skills that were lost to Australia and elsewhere, the first Astute-class submarine was £1 billion over budget. The overrun now affects the Dreadnought class to the extent that it is touch and go whether the new vessels will be in place to maintain the continuous at-sea deterrence which, next year, will have existed for 50 whole years.
It is clearly in both the nation’s economic interests and the interests of its capability that we maintain shipbuilding, so that if we have to greatly increase our naval capability because of the uncertainty posed by future expansive states, we have the necessary capability. The Minister suggested that it was in some way wrong to give contracts in order to retain work in shipyards, but that is exactly what is needed to maintain Britain’s capability to respond to uncertain threats in the future.
I must begin by directing the House to my entry in the Register of Members’ Financial Interests. I am a proud member of the GMB, the trade union that represents thousands of workers in our shipbuilding industry.
It is slightly challenging to follow so many Members who have spoken with such authority. I do not want to repeat what has already been said, and I shall speak as briefly as possible so that everyone can enjoy the football this evening.
The shipbuilding sector is of vast economic and strategic importance to our country. It is a £2 billion industry that directly employs over 32,000 people, with a further 20,000 jobs in the supply chain. It is a sector that continues to provide well-paid, highly skilled jobs for British workers—jobs that are desperately needed. The industry’s dependence on the Royal Navy means that MOD procurement policies such as those that we are discussing today are critical to the success of British shipbuilding, as was recognised in the Government’s national shipbuilding strategy. However, I fear that the Government’s narrow interpretation of EU procurement rules means that they are needlessly limiting themselves in their efforts to support a major national industry.
Under article 346 of the Lisbon treaty, EU member states have nearly unlimited freedom in respect of defence procurement. It is a freedom of which many other EU nations have taken advantage in order to safeguard their own sovereign capabilities, as in the case of Germany’s Berlin-class support ship and Italy’s Vulcano-class logistic support vessel. Yet the UK has so far applied those protections only to the production of vessels that we define as “warships”. That approach lays bare the paradox at the heart of the Government’s attitude to our shipbuilding strategy. The very existence of a national shipbuilding plan suggests a recognition of the industry’s vital importance to both our economy and our national defence, but the long-term success of that industry is being impinged on by a refusal to do everything that could be done to support our national shipbuilding industry.
Nowhere is that demonstrated more clearly than in the Government’s decision to put the bid for the fleet solid support ships order out to international tender. We have already seen them begin to backtrack on their commitment to build three support ships, with the official tender for the project now stating
“a firm commitment for 2 ships and an option for a further 1 ship”
—so, apparently, two and a half. We should not be cost-cutting when it comes to the long-term capabilities of our Royal Navy, nor should we be putting an order of national significance out to tender abroad. The construction of those ships could give vital economic support to our national shipbuilding industry, and the £1 billion deal could provide long-term stability and investment in UK shipbuilding. As the shadow Secretary of State stated, GMB research shows that up to 6,700 jobs could be created or secured if the order were to go to a domestic shipbuilder, as well as a further 4,700 in the supply chain. That would build on BAE’s recent success in securing the SEA 5000 Australian programme.
As the House knows, I am adamant that due to the industry’s dependence on naval contracts, a steady drumbeat of orders is vital. Building these fleet solid support ships here in the UK would provide a real guarantee to British workers and show that the Government are serious about supporting British business.
I have spoken before in the Chamber about the importance of the wider defence family. Those who design and build these ships are as vital to our long-term national security as those who serve on them. If we were to lose those skills and that knowledge now, as we prepare for a new post-Brexit world, the damage could last for a generation.
We cannot afford to sit back and let the free market take its course while competitor countries recognise the value of using public procurement to support security-critical industries. We must not allow our skill base to erode or our communities to decline by failing to do everything we can to provide that steady drumbeat of orders that is so vital to our continued prosperity.
During the 1980s, the UK’s withdrawal from the defence export market and our failure to establish a solid base in commercial production saw 75,000 jobs disappear. The impact on our communities and on our domestic capacity was devastating, and the Minister, who has now left, should be ashamed that he compared it with the mining industry. We simply cannot allow this to happen again.
A national shipbuilding strategy is a great step forward, but it needs to be more than words—we need orders. Our Royal Navy is still the best in the world. Let us see to it that it holds on to its ability to rule the waves. We must protect our domestic shipbuilding and ensure that these orders, and the jobs they bring here, are coming home.
The 1980s will be ancient history for many Members, but the destruction of Clyde shipbuilding during that period remains a living, breathing part of political debate in the west of Scotland. I know that many Conservative Members will roll their eyes and think, “Oh, here we go: Thatcher and shipbuilding again.” I remind them that in October 1984, the male unemployment rate in the Greenock central area was 35%. The economic shock of Thatcher’s abandonment of shipbuilding left a deep wound that we are still trying to heal.
Since 1981, Inverclyde’s rate of depopulation was proportionately higher than that of any other local authority area in the United Kingdom, and it is projected to decline for at least two more decades. That is the UK Government’s shipbuilding legacy in Inverclyde. That is why decisions made in allocating shipbuilding contracts are so important—they can make or break communities.
The Defence Secretary needed only to visit Inverclyde to see the terrible cost of removing Government support for vital manufacturing industries, including defence shipbuilding. Many of my constituents are still angry about what happened. There is still an historical obligation to the area, which the UK Government have not fulfilled. In 1976, the UK built 134 vessels. By 2011, just four were produced by our shipyards. How different that figure might have been had the UK Government guided the industry towards a more sustainable future.
Thankfully, with the assistance of the Scottish Government, one shipbuilding yard remains in Inverclyde: Ferguson Marine. Earlier this year, Ferguson Marine bid as part of a consortium for work relating to the Type 31e frigates. Last week it successfully led a European consortium in a bid for EU funding to produce the world’s first hydrogen-powered ferry. It is not a company that is afraid to move with the times. The tendering process for the fleet solid support ships is another opportunity for Ferguson Marine to show that Clyde shipbuilding is the best in the world.
We know that the MOD goes some way towards agreeing with that assessment, as its recently published report stated that Scotland was renowned for building “the world’s finest warships.” Yet despite that, the UK Government refuse to give those same shipyards a vote of confidence by making the FSS tendering process UK-only. Building in the UK benefits the UK more than building abroad. Building ships in the UK means that the taxpayers’ money of all the hard-working men and women of the United Kingdom is reinvested in protecting their jobs. And guess what? They then pay tax to the UK Government and spend their money in their local economy. The knock-on effect is that the prosperity of the entire area improves. Beyond that, shipbuilding companies with a longer order list can invest in the long-term future of their yards, and that was exactly what they did not do in the 1970s and 1980s.
It is the UK Government’s duty to invest in the UK shipbuilding industry and give it the confidence to take on apprentices and to invest in training its workforce. If we build these ships in another country, the employees’ tax is lost to us, as is the spend in the local economy and the opportunity for investment in the yards. UK yards can barely survive and are living from hand to mouth. They certainly cannot prosper, and ultimately they will fail. We must learn from the lessons of the 1970s and 1980s. The UK Government must not turn their back on the shipbuilding industry again, as they did in the ’70s to the coalminers and the steelworkers.
In 2012, the UK Government issued the contract for the MARS tankers to a South Korean company, Daewoo. UK taxpayers were subsidising Korean shipyards. Why risk making that mistake again? I have heard it argued that if we allow countries across the globe to bid for UK work, UK shipbuilders will be able to bid for work across the globe. Well, not if they don’t exist they won’t, not if their workforce don’t possess the necessary skillsets they won’t, and not unless we have first nurtured a strong, vibrant shipbuilding sector in the UK they won’t.
The UK Government are desperately trying to find an excuse to justify the fleet solid support ships contract not involving a UK-only tendering process. It is almost as if they are trying to convince the country that they can do trade deals abroad, particularly with countries outside the EU27. Surely a UK Government who genuinely cared about domestic shipbuilding would be trying to find an excuse to give UK yards the best possible chance of success, not laying obstacles in their way and threatening a successful outcome. The excuse we have heard regurgitated over and over is that the FSS should not be seen as warships and that the tendering process should therefore be opened up to international competition. This is despite the fact that these vessels will be armed and that the Royal Fleet Auxiliary provides operational support for counter-terrorism and counter-piracy operations.
Other European states have procured internally for similar auxiliary vessels. In some instances, they did not open up their tendering process to the international market. The proposed FSS builds do not need to be put out to tender under EU rules or any other rules, yet the UK Government shrug their shoulders and say there is nothing they can do. Shipyard workers in my constituency have a right to feel angry and to be frustrated by the UK Government’s complacent attitude. I urge the Minister to think again and to give as much support as possible to shipyards such as Ferguson Marine in my constituency. They are ready, willing and able. Their workforce will pay their tax and spend money in the community, and their senior management team will be able to invest for the long term in the future of shipbuilding on the lower Clyde. This and only this will guarantee a growing and stable workforce for generations to come.
I welcome this debate and declare two interests: first, as a member of the GMB union; and, secondly, as the chair of the all-party group on shipbuilding and ship repair. This is a great opportunity to highlight a great industry encompassing not only shipbuilding, but maritime engineering, ship repair, design and combat systems. It is also an opportunity to celebrate the skills of the workforce in this sector.
However, the industry is heavily reliant on the direction of Government policy. The Government issued their shipbuilding strategy earlier this year and, unlike the Under-Secretary of State for Defence, the right hon. Member for Bournemouth East (Mr Ellwood), I have actually read it in detail. The all-party group is conducting an inquiry into it at the moment. I believe that it is a missed opportunity, because it is turning the clock back to what we had in the 1980s—more competition between the yards in the UK. The Government withdrew from shipbuilding in the 1980s, but the Rand corporation found in 2005 that, rather than driving better value for taxpayers’ money, that policy drove costs up. Francis Tusa, who gave evidence to our inquiry, made it clear that, looking as far back as 1945, we can see that striving for competition in the shipbuilding industry has led to increased costs and delays.
Unlike other industries, the shipbuilding industry needs a flow-through of work. A number of Members have already highlighted the importance of the regular drumbeat of work, and my hon. Friend the Member for Barrow and Furness (John Woodcock) gave a classic example of what happens when we get it wrong. When the last Tory Government stopped building submarines, they took away the ability for the industry to do that any more. If we do that again in other sectors, we will lose the flow-through of work there as well. The hon. Member for Torbay (Kevin Foster) mentioned Appledore, but Appledore has no work coming through, so he should be arguing vociferously for the fleet solid support ships to be built here, because there is a chance that Appledore would get some of that work.
To invest in the sector, companies need stability, and the only way to get stability is to have work coming through. We cannot turn the supply of complex skills needed to build complex warships on and off like a tap, and we have seen that in Barrow. People also forget that skilled people and apprentices go and work in other sectors of the economy, so investment in this sector means investment in other sectors as well. This is also about the supply chain, because small and medium-sized companies need confidence to invest. Overall, this is about sovereign capability and whether we want this country to be able build these ships, and I think that we should.
Furthermore, we should not just concentrate on hulls. The through-life support of these ships and many others is of vital importance not just for jobs, but for technology. If we look at the weapons systems that might go on the FSS ships and other combat ships, they will be exportable around the world. The design is exportable. BAE Systems has had great success recently with the Type 26 in Australia, and the design is a world beater. We can only achieve that, however, if we keep the designers in this country, and we can do that by ensuring a flow of work. However, where are those ships being built? They are being built, quite rightly, in Australia due to the Australian Government’s commitment to having a sovereign capability to build such ships. If we want to retain skills in this country, we need to be able to do that as well.
It is a no-brainer that FSS ships should be put into UK shipyards, because that would help to keep work flowing through and provide stability. The hon. Member for Dunfermline and West Fife (Douglas Chapman) made a good point about Rosyth, because it is a world-class facility thanks both to the skilled workforce and the investment that went in. However, having put all that together, what other country in the world would then rip it apart and sell off the cranes? No one would, and that is the sort of vandalism that we are likely to face.
The arguments for why the new ships should not be built here do not hold a great deal of water. The Minister who opened the debate was completely wrong about the MARS contract, and I will read from an article in Defense News from August 2016:
“The bidding proceedings saw no British contractors enter the final stage of the tanker competition, leaving the door open for the huge South Korean shipyard to outbid rivals for the work.”
So—[Interruption.] The Minister says “final” from a sedentary position. Yes, I know that, because I have spoken to some of them, and they were told by MOD officials not to bid. There is an opportunity here not only to ensure that the new ships, which we need for our defence, are procured from this country, but to support and see a renaissance in UK shipbuilding, ship repair and technology. I do not know why the Government do not want to do that. Future Government policy needs to involve more co-operation with and support for the sector, which will not only have benefits for our sovereign capability, but provide a major boost to our economy, which will certainly be needed in the next few years post-Brexit.
I will try my best to keep my remarks to four minutes, Mr Speaker. First, may I welcome the trade union representatives from the Clyde shipyards? Such is their passion for the industry that they have come down to London today to hear this debate.
The debate so far can be summed up by paraphrasing that great conservative icon Lord Vader because, “We want these ships, not excuses.” All we have heard from Government Members has been excuses, because—[Interruption.] If the hon. Member for Torbay (Kevin Foster) has ever watched the films, he would know that Lord Vader is far from a socialist.
What we have heard today is exactly what we heard at Defence questions on Monday, when Opposition Members were told that the reason why fleet support ships are going to international competition is that it is in the national shipbuilding strategy. Government Back Benchers have been told that the Government will make sure the weaponry for these ships will be UK-based.
The national shipbuilding strategy is based on Sir John Parker’s report, which says:
“There is the opportunity with the Fleet Solid Support ships for UK firms to make…bids, and hopefully secure the contract, thus contributing further regional economic benefits in the UK.”
The Parker report does not recommend international competition for the fleet support ships, so it is wrong for Ministers to say that the national shipbuilding strategy accepted all the recommendations of the Parker report. Frankly, we find ourselves in a position where the Government are saying there should be modular build for small frigates but not for fleet support ships, which is ludicrous.
The Government cannot have it both ways. I asked a written question on the range of the weaponry, sensors, arms and close-range guns, such as the Phalanx, and the answer, published on 27 April, has been mentioned. The Phalanx is a Gatling gun designed to shoot down fast anti-ship missiles, aircraft and fast attack craft. It is fitted only to high-value ships that are vital to naval operations, so it is ludicrous to say that these ships have limited weaponry.
The MARS vessels are fitted with cannons, mini-guns, machine guns and anti-submarine and anti-surface-warfare helicopters, yet we have been told by Ministers that they are not warships. I am sorry, but I strongly disagree. If it looks like a warship and acts like a warship, it is a warship.
Opening up shipbuilding contracts for international competition only makes sense if other countries are doing the same, so which other countries are putting auxiliary ships up for international competition? Is France, Germany, Italy, Spain or the United States of America doing so? The answer is no. No one treats auxiliary ships as a commercial commodity to be bought wherever, because the reality is that other countries see them as vital ships both for military and industrial reasons.
I support the Opposition motion, and the hon. Member for Llanelli (Nia Griffith) made important points about the economic benefits of these fleet support ships being built in the United Kingdom. It will keep people in work, and it will bring tax, national insurance and vital revenue into the country. Again, if it looks like a warship and acts like a warship, it is a warship, and it should be block built in this country.
Phalanx is a defensive weapon.
Again, the Minister is shouting from a sedentary position. The MOD website is full of the vital military components used by the Royal Fleet Auxiliary, which is why these ships should be built in the United Kingdom in a modular way—the same way as the Queen Elizabeth aircraft carrier.
I not only declare an interest but, as the MP for Plymouth, Sutton and Devonport, proudly proclaim that I am the vice-chair of the all-party parliamentary group on shipbuilding and ship repair. I am very proud to be a GMB and Unite member. I add my name to the list of Members who have called today for the new Royal Fleet Auxiliary ships to be built in Britain. Build them here. Do not ship those jobs abroad.
This is not the first time we have had this debate. Members will recall that I led a debate in Westminster Hall on the national shipbuilding strategy in January, when I offered scrutiny and suggestions to make the strategy more robust and valuable to industry, to the Government and to our armed forces. I asked why, in an uncertain world, we are not spending more on defence, and I raised my concern about the damage caused to Plymouth and Devonport and to those who work for our Royal Navy both in and out of uniform by the constant speculation about the future of amphibious capabilities like Plymouth’s Royal Marines, HMS Albion and HMS Bulwark. I also called for the RFA fleet solid support ships to be built in Britain.
Ministers will know that they have my support in calling for more money for defence from the Treasury and especially in using that money to baseport the new Type 26 frigates in Devonport, to save the amphibious ships and to strengthen our Royal Navy. Ministers will also know that I am a critical friend of theirs, and on procuring the new RFA ships abroad, they are getting it wrong and I am do not mind telling them. We need three RFA ships, not two. Cutting that order is simply not good enough. At 40,000 tonnes each, the combined order would be the same size as the aircraft carrier order, sustaining jobs right across the country.
My arguments are the same today as they were in January. We risk sleepwalking into major contracts being given to those abroad. No other major NATO power shifts supply ship work abroad. No other major NATO power would be so cavalier with its sovereign defence capabilities. No other NATO power would risk the skilled jobs of its defence industry in the way that is being done here. I believe contracts to build ships for the Royal Navy and RFA should be onshored. These ships should be homegrown, British-designed and British-made, using British steel and British technologies, and preserving Britain’s sovereign defence capabilities to design, build, equip and repair complex and important ships for our own use and for export. I favour a restricted tender for these ships, as I did back in January. They will be carrying arms, munitions and supplies, so only UK shipyards should build them. I also believe that history will be unkind on those MPs who offshore our defence work.
Let us not forget that when the Royal Navy is on the frontline, in contested waters, off the coast of hostile powers, the RFA is there with it. Often overlooked, these ships form a vital part of the Royal Navy’s ability to operate at sea, and they lead humanitarian, counter-piracy and counter-narcotics operations in and of themselves. RFAs are forward deployed, so they are already in the firing line. Let us not forget that the Government would have the support of Members on both sides of the House if they followed the recommendation and applied a restricted tender.
I know that the hon. and learned Member for Torridge and West Devon (Mr Cox) is now otherwise engaged in his role in the Cabinet and so cannot be here to talk about the Appledore shipyard, but it has been mentioned. Once the superb work it is doing on the Irish offshore patrol vessel is complete, the yard will have no more work. This little shipyard is first-class. It has the opportunity and the skills to build Type 31e modules or modules for the new RFAs, but if it does not get that order, its future looks bleak. I have met the workers from this yard and let me say to the Minister that they are ready, willing and able to deliver modules for the new RFA build. Give them that chance. Back British jobs and build them here.
I shall do my best to keep my remarks brief, Mr Speaker, although this is a subject close to my heart. I have grown up around the shipbuilding industry my entire life, and I had the privilege of working in it as a new graduate in 2010-11 and through to 2016. Through that time, I have learned the bitter lessons of failed and deeply flawed MOD procurement practices. Through the 1990s, my dad had to travel around the country following shipbuilding orders, as Type 23 frigate orders were drip-fed and we were usually in a race to the bottom with the Irish shipbuilders and Swan Hunter to build them. That was a recipe for disinvestment and unemployment, and that was the harsh lesson learned. That is why the Labour Government turned away from the policy after 1997 and promoted a defence industrial strategy, which was well regarded in all parts of the House. That was followed up by a terms of business agreement that would have guaranteed a stable pipeline of work, with one ship built every 12 months in a six-year design cycle for complex warships. That was extinguished in 2014 by the MOD, in pursuit of an utterly wrongheaded policy on shipbuilding procurement.
Let me make it clear: the capacity to award this contract to a British shipyard is entirely at the MOD’s discretion, under the terms of article 346 of the treaty on the functioning of the European Union. Indeed, it is common practice to have done this; France, Germany, Italy, Spain and US do it. Most recently, Canada has pursued a similar policy with its national shipbuilding strategy. Its big ship construction will be focused on Vancouver and complex warship construction will be focused on Halifax, with a new purpose-built frigate factory there. Sounds familiar, does it not? Only the Canadians have actually achieved it and we have not.
The Govan shipyard is now the mainstay of British shipbuilding capacity, with the largest steelwork capacity in the UK and by a considerable margin. It is represented by the hon. Member for Glasgow South West (Chris Stephens), and I had the privilege of working in it for several years. The yard is also the only one capable of building complex warships in the UK—to date. That shipyard exists today only because it was saved in 1999 by a UK Labour Government who made it clear that they would save it by providing a Royal Fleet Auxiliary ship, the Wave class, and then another, the Bay class, to that yard. That enabled it to be match fit to build the Type 45 destroyers, the aircraft carriers and, subsequently, as we see now, the River class ships and the new Type 26 frigates. That yard exists today only because that Government took a conscious decision to ensure capacity was maintained at those shipyards.
Today, we see a new crunch point emerging. The current Royal Navy shipbuilding capacity plan for 2020 to 2040 shows a large UK ship-construction gap, primarily focused on Rosyth, which will have a 15-year gap in work between the completion of the HMS Prince of Wales and the first refit of the Queen Elizabeth or, indeed, the build for the new future amphibious capability. It is the only facility in the UK that is currently capable of building large-beam vessels wider than 20 metres. The new FSS vessels are 29.5 metres and the new future amphibious vessels will be wider than 20 metres, so to ensure that the pipeline of capability is maintained in the UK, we must build the FSS in the UK. To ensure that we have our future amphibious capability—as the Minister conceded, the amphibious capabilities are regarded as sovereign shipbuilding capabilities—we must secure that pipeline of work to enable future amphibious-vessel construction.
Let us be clear about the economic benefits, which the Minister dusted over somewhat in his rather flimsy analysis. According to the Royal United Services Institute, naval shipbuilding work offers a return of 36p in the pound. Some £285 million would be returned to the Exchequer, but that is just a quarter of the overall industrial and economic benefit to the UK. A recent Institute for Public Policy Research report, which took into account welfare savings and greater GDP growth, found that naval shipbuilding activity in the UK offered a return of 40% to the Treasury. That must be taken into account when we consider the awarding of public procurement contracts. Some 70% of shipbuilding contracts are derived from the supply chain, which was worth £2.8 billion in 2015. That is a huge industrial benefit to the UK.
Overseas shipyards like Daewoo in South Korea are not bidding out of altruism; they are aggressively pursuing state-backed support efforts to pump-prime their own industrial base. Daewoo Shipbuilding & Marine Engineering in South Korea invested $6 billion in 2017. Sir John Parker’s report, which the Minister lauded, said:
“Overseas build brings its own challenges including potential denial of opportunities for the UK supply chain, higher costs of overseas supervision and potential foreign exchange risks”—
as we saw in the recent RFA build in Korea. The report went on:
“Nor does the foreign build of ships make the direct prosperity contribution to the UK economy that an onshore build would achieve.”
If the Ministry of Defence is to stand by its convictions and its ideological position on this issue, I urge it to demonstrate the economic and social impact of domestic production versus offshore production, instead of the flimsy assertions that Government Members have made today, which have been utterly at odds with the truth.
If the Government define a Royal Fleet Auxiliary ship as not a complex warship in respect of being fitted with armaments, do they class the River class batch 2 as complex warships? The proposed FSS ships will contain far more armaments than the River class patrol ships—[Interruption.] Yes, so are the patrol ships, so why do the Government define them as sovereign build but not the FSS? Their logic does not stack up; it is based on flawed analysis. We must have a virtuous cycle of investment, not a vicious cycle of disinvestment. The harsh lessons of the 1990s were learned: stop throwing away 20 years of coherent and proper defence procurement planning in this ridiculous pursuit of an ideological vanity that is going to utterly fail our shipbuilding industry.
The World cup semi-final starts in less than half an hour, so I shall make sure that my comments are uncharacteristically brief.
I thank all Members who spoke today; I apologise for not referring to them individually. I give a special mention to my hon. Friend the Member for Llanelli (Nia Griffith), who made the case for why greater Government intervention is necessary not only for defence manufacturing in the UK, but, in a broader sense, for manufacturing as a whole.
Manufacturing accounts for 10% of output, 44% of exports and 70% of business investment in research and development. Output per hour is £4 higher in manufacturing than the average for all sectors, and the average annual earnings of somebody who works in manufacturing are nearly £4,000 higher than average earnings from across the whole economy. Over the past 35 years, though, the UK has lost 3 million manufacturing jobs, which is 53% of all manufacturing jobs. Compared with 66% in 1991, some 81% of all jobs in the UK are now in service sectors, and only 8% of employment is in manufacturing.
The industries that, as we have heard, provided our parents and grandparents with employment are no longer an option for our children and grandchildren. There are many reasons for this shift, including Thatcher’s big bang deregulation of 1986 and the movement of production overseas in search of cheap labour. However, as time goes on the longer-term costs of this shift have become increasingly apparent, especially in three key areas. First, there is the loss of jobs and the rise of lower-skilled, lower-paid jobs. Young people growing up now are more likely to find work in services such as retail, hospitality and other low-skill, low-wage industries that often have poor terms and conditions.
The second key area is regional imbalance between areas devastated by the loss of industries and key service industry hubs such as London and the south-east. The shift to a largely service economy has not only impacted people on an individual level, but has profoundly affected entire communities. Industries that were once the sole employer and engines of local economic growth have disappeared, tearing the heart out of communities.
Let us look at Rossendale in Lancashire for example. In 1984, 58% of employees worked in textile manufacturing, but now that industry has almost completely disappeared in that area. A more recent example is Redcar, where steel runs through the veins of local people. The closure of the steelworks there has meant that thousands have lost their jobs. It is not enough to let industries fall by the wayside and simply rely on the financial sector to provide growth and then redistribute it to other areas of the country.
The third area that our industrial strategy must address is our deteriorating balance of payments. Our current account deficit currently stands at almost £18 billion, or 3.4% of GDP, and we import 41% of our manufacturing inputs. Research suggests that a rise of 10% in goods exported, and a 10% decrease in goods imported, would contribute £45 billion to the UK economy. It has been estimated that a £20 billion increase in domestic production would directly create between 100,000 and 200,000 high-quality jobs. What could the Government be doing to support British manufacturing and to encourage the building of products here in Britain? A key policy lever for supporting British industry is obviously infrastructure investment. Upgrading the nation’s infrastructure—
This is all very interesting, but when is my hon. Friend going to reply to this debate? Some very serious points have been raised about defence issues, which are very relevant to defence workers across this country. I am sorry, but this is simply not answering them.
I thank my right hon. Friend for his contribution, but it has somewhat delayed my speech and stands in the way of the World cup semi-final. I am coming to those points.
What should the Government be doing to support British manufacturing? As I have said, infrastructure is a key tool in driving investment upwards. Upgrading the nation’s infrastructure in projects such as the Swansea Bay tidal lagoon, which the Government shelved recently, would have created more than more than 2,300 jobs in Swansea and paved the way for the creation of a new domestic industry with substantial export potential. Of course, the Government must ensure that they negotiate the best deal possible, but they must also, on projects such as this, start seeing beyond the short-term basic cost calculations and realise the wider benefits of infrastructure projects such as Swansea.
The most obvious start, so obvious in fact that it is shining like a Belisha beacon, would be using the enormous power of Government procurement to support British industry. The public sector currently spends more than £200 billion every year in the private sector, but sadly this Government have failed effectively to use procurement as an economic lever for supporting manufacturing. There are many examples of this, not least the failure to support British steel. It was revealed last year that the renovation of Big Ben clock tower is using steel from Germany, Brazil and the United Arab Emirates.
On a point of order, Mr Deputy Speaker. I thought that it was customary in a wind-up to reply to the debate. I am sorry, but Big Ben has not been mentioned this afternoon. The many defence workers who lobbied Parliament yesterday on this contract expect us to respond to this debate.
I am leading on to that issue. It is a debate not only about the ships in question, but about wider manufacturing procurement strategy.
Given the severity of the crisis facing British steel, this is simply shocking. The Government need to take a long-term approach to procurement, appreciating the wider economic and societal benefits of their decisions, rather than simply driving down the upfront costs. The Minister said that this is what the shipbuilding strategy states, but what I have read so far in the strategy is extremely ambiguous, and there is no detail as to how these wider socio-economic benefits are measured or quantified. Perhaps the Minister can respond to that point in his summing up. It would also be helpful to have confirmation that reports that a deal worth £2.5 billion in relation to the AWACS—airborne warning and control system—contract has been awarded to Boeing with no UK content.
Our motion recognises the wider socioeconomic benefits of procuring wisely. We have sought to place the fleet solid support ship order with domestic shipyards, creating or securing 6,500 jobs, including 1,805 shipyard jobs, which are highly skilled and 45% better paid than the average for all jobs. It would also mean that £285 million of the estimated cost of the order could be returned to the Exchequer through taxes. Many people across Britain clearly see it as right, moral and economically sound to take this course of action. The Government have a duty to use their enormous spending power to support British industry and its workers. Tonight, football’s coming home; we need a commitment from the Government that the same will happen to British manufacturing.
It is a pleasure to respond to this important debate. I think that we have had 12 passionate speeches on this matter. [Interruption.] I thank the right hon. Member for North Durham (Mr Jones).
Although we all agree about the importance of the future of our shipbuilding sector, there is clearly a differential between my views and those of the Ministry of Defence, and the views of many Opposition Members. However, I am willing to recognise completely openly the commitment of those who have spoken in this debate to our defence sector, the defence industry and jobs within that industry.
Before I go on to my detailed notes, I want quickly to say two things. I have been asked to be short in my response because of a football match that is going on this evening—although, as a Welshman, I am quite happy to miss kick-off.
I just want to place on the record a clarification of the comments made by the Under-Secretary of State for Defence, my right hon. Friend the Member for Bournemouth East (Mr Ellwood). He was correct in saying that UK companies were involved in the MARS tanker competition and procurement process, but Opposition Members are also correct in saying that there was no British company involved in a final bid. I hope that that clarifies the point of order made by the hon. Member for Caerphilly (Wayne David).
I welcome the fact that the shadow Secretary of State has brought this debate forward. The comments made by the hon. Member for Glasgow South (Stewart Malcolm McDonald) were also very interesting, and there is no doubt that the team from Glasgow have very much argued the case for their city on this issue. I also welcome the speeches made by the right hon. Member for North Durham, the hon. Members for Dunfermline and West Fife (Douglas Chapman), for Barrow and Furness (John Woodcock) and for Glasgow South West (Chris Stephens), and of course my hon. Friend the Member for Torbay (Kevin Foster), who made an important speech highlighting the fact that we have to understand the context in which these decisions are being made.
The truth of the matter is that we did recommend a shipbuilding strategy and we commissioned a report from Sir John Parker. We have accepted all the recommendations of that report, and it is important to highlight that we have done that in full. The crux of this issue and of this debate may come down to the comments made by the right hon. Member for Warley (John Spellar). I thank him for his kind words. He said quite clearly that he had no problem whatever in companies based in the United Kingdom that are not owned or held in the United Kingdom competing for these contracts. That goes to the crux of some concerns that Government Members have about this motion, because it says very clearly that that contract should be offered only to “UK-only competition”. There is no definition of what that means, so the right hon. Member for Warley was probably discontented with the Opposition motion.
It is very clear that the Government are fully committed to supporting our defence sector. The shipbuilding strategy was not developed in order to avoid our support for the shipbuilding sector. The whole point was to ensure that we did support, in a coherent manner, a shipbuilding sector that would be competitive on an international basis, that would be able to retain the skills about which hon. Members have spoken so passionately, and that would allow the qualities of our shipbuilding sector to be understood and appreciated on a worldwide basis.
The Australian Government’s order of the Type 26 frigates in the SEA 5000 competition is an acknowledgment of the design skills that we have on the Clyde. It is also an acknowledgment of the confidence that the United Kingdom has in saying very clearly that we want to compete on an international basis and to offer our products on an international basis, and that we want to do so with a degree of confidence. We do not believe that the way forward for our shipbuilding sector is simply to say that every single vessel has to be built in the United Kingdom, because we are more ambitious for our shipyards. We want to see our shipyards winning contracts on an international basis.
I want to correct something. When I first stood at this Dispatch Box as a Defence Minister, I was told by the right hon. Member for North Durham that we had not sold a warship design in 40 years, so what made me think that we would start now? Well, we have. That is an indication of the fact that our strategy is working. It is working because we have confidence in our shipbuilding sector.
I remind the hon. Gentleman of the comment by my hon. Friend the Member for Torbay: we won the contest to build OPVs for the Irish navy. Again, that seems to be ignored. I find it very odd that Members who claim to speak up for shipyard workers throughout the United Kingdom seem to dismiss our success in ensuring that we had that contract delivered for the Irish navy.
I need to make some progress because I must cover some of the points that were touched on.
From a defence perspective, we are trying to put a coherent plan in place to ensure that we have a competitive UK defence industry that can compete with the best. The way to do that is not to be scared of competition but to embrace competition. We have a shipbuilding strategy that says very clearly that we will understand the need for a national sovereign capability when it comes to building our warships. We need to make sure that we can measure our shipbuilding industry against the best in the world. The way to do that is not to go down the route of a protectionist “Britain first” policy but to invest in the capability that we have in our shipyards. That is why we invested £6.3 billion in Rosyth when we saw the fantastic build quality in the completion of the Queen Elizabeth class. That is why we are investing £3.7 billion in the first three Type 26’s in Glasgow. That is why we are showing a degree of confidence in our shipbuilding sector that Opposition Members need to share.
The key thing, as my hon. Friend the Member for Torbay said, is that when Opposition Members talk about threats to the south Wales steel industry as a result of the “America first” policy, they are quite happy to attack Donald Trump for his protectionist attitude. The same thing can apply to this debate in spades, I am afraid. Competition and the ability to compete internationally are based not on protectionism but on the ability to be open in the way that we deal with this issue.
No, I will not give way any further at this point.
The key thing that Opposition Members need to be aware of is that in addition to developing a shipbuilding strategy, we are ensuring that we are looking at the future of our combat air. That shows that this Government are taking a coherent approach across the board. We recognise fully in the Ministry of Defence the importance of defence in terms of the contribution that it can make to the prosperity of the United Kingdom. I welcome the contribution made by my hon. Friend the Member for Ludlow (Mr Dunne) in his report on the prosperity agenda, which has been welcomed by Members in all parts of the House. This Government and this Ministry of Defence intend to make sure that the lessons and the ideas put forward in that report get full consideration.
Many Opposition Members have rightly argued that in our procurement processes we should be thinking very carefully as to the means by which we can ensure a contribution to the economic wellbeing not only of the United Kingdom but of localities within the United Kingdom.
I am sorry, but I have to make some progress.
What we are highlighting is that across the Chamber we want to see a successful British shipbuilding sector, and we categorically want to see the conclusion of Sir John Parker’s report implemented. He said clearly in recommendation 21 that he wanted to see the opportunity for British shipyards to compete for the fleet solid support ships contract. That is categorically the position of the Ministry of Defence. We want to see a competitive bid from British shipyards. It can be a competitive single bid or a block build option, but we want to see that bid forthcoming. We want that bid to win because that bid is the best, the most cost-effective, the one that offers value to the taxpayer and the one that shows that the confidence we have in our shipbuilding sector is justified and will be maintained.
No, of course it is not, which is why every single tenderer in this process will be subject to the same procurement rules and the same European rules that exist at this point in time, to ensure that we have a level playing field. The hon. Gentleman should understand the importance of ensuring that we have a level playing field. The way to ensure such a level playing field is not to insist on only UK companies being able to bid for what is not a warship.
The strategy has been adopted in full and was consulted on widely. The Ministry of Defence has decided that we have to adopt the strategy and implement it, and we are confident that we will see the success of this strategy and, more importantly, a very successful future for our shipbuilding sector. I look forward to bids coming in for the fleet solid support ships from British yards with the confidence that seems to be lacking from Opposition Members.
Question put and agreed to.
That this House recognises the important contribution of the defence industry to the UK; calls on the Government to support the UK defence industry by taking into account the economic and employment benefits to the UK when awarding contracts and to publish a full, overarching defence industrial strategy; and further calls on the Government to make the competition for the Fleet Solid Support ships contract a UK-only competition to maximise the return on that contract.