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House of Lords Hansard
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Royal Navy: Type 31e Frigates
20 December 2018
Volume 794

Question for Short Debate

Asked by

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To ask Her Majesty’s Government what progress has been made on the tendering process for building five new Type 31e frigates; and what impact this process will have on the future of the Appledore shipyard.

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My Lords, I am grateful for the opportunity to have this topical debate. I declare an interest as a resident of the Isles of Scilly, off Cornwall. We are having the debate because the Appledore shipyard in north Devon is planned to close at the end of March next year, with the loss of some 200 jobs and many local suppliers to be affected. The present operator, Babcock, says that it will move all its business to Plymouth and other areas, but many people comment that the company seems to have given up on seeking work to keep the yard open. Of course, any shipyard needs orders; I hope the Minister, when she replies, will tell us a little about the Type 31e frigates.

Appledore shipyard has a proud history. While not unique, the level of expertise there is among the greatest in the country. I question whether the Government, and particularly the MoD, can afford to let it die. A good campaign has been started by the GMB and Unite unions to keep the shipyard alive. Jake McLean, the campaign manager, tells me that the yard has built 197 ships, beginning at the time of the Spanish Armada. There used to be 40 shipyards on the banks of the River Torridge; now there is just one. Most recently, Appledore built many sections for the two new aircraft carriers, the “Queen Elizabeth” and the “Prince of Wales”, and four high-quality offshore patrol vessels for the Irish navy.

As the noble Lord, Lord Greenway, said to me this morning—sadly, he could not speak today—perhaps we need some fishery protection vessels, which are cheaper and easier to build and operate than destroyers for keeping French fishermen away. That is something the Minister might want to reflect on afterwards. The quality of work in the yard is probably one of the best in the world and the prices, they say, are cheaper than those of many competitors. It can build ferries, dredgers, tankers, superyachts and naval ships.

The campaign for the yard to stay open is also being led by the Devon and Cornwall Business Council. It gives some interesting statistics about the area of Torridge: trade apprenticeships are almost double the national average, and the Appledore shipyard provides nearly 80% of all employment in the ward of Appledore. That is a very high percentage in a small town with pretty awful road access to anywhere else in the county. If the shipyard is lost, it will potentially have a serious impact on business rates. The area around the yard is one of the 20% most deprived areas in the country, but there is very strong local community and loyalty. Workplace-based earnings in Torridge are less than 79% of the English average. There are many similarities with other places that are badly connected in the south-west and the Isles of Scilly.

However, I think one of Babcock’s ideas is that many of the high-quality workforce will suddenly be happy to commute to Plymouth. It must be at least a two-hour bus journey on pretty horrible roads. I fear that the whole community and this high-quality workforce could dissipate unless it is somehow preserved by the shipyard continuing.

We all know that, for a shipyard to work, it has to have an operator and some orders. I and others have been looking at trying to help see if anyone is prepared to take over the operation when Babcock leaves. The yard owner, Langham Industries, is very keen to keep shipbuilding going and seek potential operators. I met one operator this week, Oil Gas and Marine Ltd, which is very interested in taking over the yard and restarting shipbuilding—or continuing it we hope—of any description. I know it has been in discussion with Babcock and the owner about the assets and the staff. It claims to be able to finance a start-up provided that it receives orders. So there is hope there, but orders are key.

I have mentioned the Type 31e frigates, but many other ships could be built for the UK Navy. There is fishery protection, as I have said. There are other countries’ needs and the offshore industry, such as oil and gas supply, windmills and even something that the Cornwall and Isles of Scilly LEP is promoting—offshore windmills that float on pontoons. Many of these could also be built in the Appledore yard. I am not sure how high-tech the pontoons are, but they are moored to the seabed. We will see what happens.

But we cannot expect any new owner to survive on fresh air, so we have to get some new orders going. My contribution to this is to encourage the building of a new passenger ship to replace the aged “Scillonian III”, which plies between St Mary’s and Penzance in the summer. In winter, there is no ship service; one flies in little planes, which last winter were disrupted 29% of flying days. Many of us around there think that, rather than spending £20 million on redundancies in Appledore, one should spend £20 million on building a new ferry.

That would be a challenge, but it is worth exploring. The sea conditions are worse than the Pentland Firth at the north of Scotland in terms of wave heights. I have all the data. You need a big ship to go across the rough sea but a small one to get into the harbour, so you need a compromise, which has to take the bottom at both ends. A design for a new ship—which would actually have stabilisers, which are quite common on most other ferries—was completed about six years ago. It could carry all the freight and all the passengers. The islands need this to survive and prosper.

Could the Isles of Scilly service be the saviour of Appledore? We have to move fast and the Government have to move fast. The previous ferry 42 years ago was financed by government loans, and they have been repaid. Scotland, of course, has it easy because the Scottish Government subsidise everything, but we do not so here.

Meetings with Ministers and officials have focused on how to get a winter ferry service, how to ensure that the operator does not remove the ship to make more money elsewhere—which is always a challenge—and on an operator of last resort. Ministers have made it clear that they are prepared to consider support only if there is one voice from the island community. I believe that has been delivered in its first stage. The timing is quite critical. One could start on a metal-bashing contract—as I call it—at Appledore from this design very quickly. It is all approved by the Maritime and Coastguard Agency. Then one can talk in more detail about what has to go on top.

Who would finance it is a question that needs to be asked with Ministers, local authorities and the present operator—it has just published its annual accounts this week, and they do not look too promising for funding a new ship. It would be possible for Ministers to arrange for a new “Scillonian” to be ordered from Appledore to save the yard. A new ship operating all year round would really benefit the people of Scilly and their guests. I know that Ministers believe that the modern shipbuilding facility at Appledore is worth preserving and encouraging. It has a long tradition.

I have three questions for the Minister. Do the Government believe that continuity of shipbuilding at Appledore is something that is important not only to the town itself but also to the south-west and to defence? What are the Government doing to encourage a new operator and encourage new orders for Appledore from the UK or elsewhere, naval or civilian, to reinstate a full order book for this important facility? Will the Government encourage their transport colleagues to take forward an order for a new “Scillonian”?

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My Lords, I have a brief intervention to make that is rather similar to the line that the noble Lord, Lord Berkeley, has taken. I thank him warmly for introducing this debate. Just sometimes you have to look on a national basis, beyond value for money for the taxpayer or the return on a commercial investment, and focus instead on equally important matters from a local viewpoint and the state of the economy in that particular region.

I live not far from Appledore, in a very poor part of the United Kingdom—north Devon—where agriculture and tourism are by far and away the most important activities and large or medium-sized industrial concerns are rare. But those who work in such companies are proud and loyal people whose families have very likely worked there for generations. Appledore is such a place. It has a long history of a proud and dedicated workforce, which is immensely loved and respected in the community for its many years of service to the Royal Navy. All of a sudden, although rumour had been around, news came that that great icon of heritage renown was to close and 200 mostly highly skilled employees were to go. For them, a terrifying vacuum suddenly evolved. If it had been anywhere else in the United Kingdom, it would have been different. Help would have been much closer at hand. Where is it for them now?

I simply say that Appledore, from now on, needs to be looked at both pragmatically and commercially, particularly bearing in mind the region and its financial circumstances. Furthermore, the Government need to understand that the West Country does not start and end at Bristol, as was—and still is—the common perception. Appledore is what it is and where it is, and it needs to be regarded as a special case, with a skilled and loyal workforce who could have still so much to offer.

I do not anticipate much encouragement from the Minister, but where principle and people’s livelihoods are at risk, you must do your utmost to persuade government and others that hope springs eternal.

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My Lords, I thank my noble friend Lord Berkeley for introducing this debate. I am delighted that we have noble Baronesses on the Front Bench. I thought that there might be more in the Chamber because noble Baronesses are able to launch ships, which is something that noble Lords cannot do, and of course they immediately become “ladies who launch”.

Appledore is just the tip of an iceberg because, without a full order book, I believe that other yards will go the same way. Let us look at the current UK ship orders. There are only two warships in build in the UK: HMS “Prince of Wales”, which is fitting out in Rosyth and is almost complete, and HMS “Glasgow”. Two other frigates are on order and they will follow on when “Glasgow” is moved out of the yard. So, as we speak, across the United Kingdom steel work is going on on only one frigate. That is a disgrace for a maritime nation such as ours.

There is of course the plan to award a contract for five Type 31e frigates by December 2019 and a contract for the second batch of five Type 26 frigates in the early 2020s. Indeed, I had understood that one bid for the Type 31e comprised Babcock at Appledore in north Devon, Ferguson Marine on the Clyde, Harland and Wolff in Belfast, with integration at Babcock Rosyth, Fife. So, as I understand it, one of the businesses is Appledore and it is a Babcock build, so the closing of Appledore seems strange. Perhaps the Minister can confirm that the plan includes that bid.

However, these plans are just aspirations, of course, and I am afraid that I am old enough to have seen many such aspirations dashed: two landing platform helicopters reduced to one; 12 Type 45 destroyers reduced to six; 13 Type 25 frigates reduced to eight; eight Astute-class submarines reduced to seven; and so on.

There is a strategic imperative to keep a minimal shipbuilding capability in this country, but the continual loss of yards such as Appledore puts that at risk. This is clearly understood in the case of nuclear submarines, although in the early 1990s the Government almost lost the United Kingdom that capability due to a lack of orders. Similarly, I think that the Government understand the requirement for our nation to design and build complex warships. However, there need to be a sufficient loading and a steady drumbeat of orders, not least to ensure that SMEs can survive, but at present these orders do not exist. Without them, that shipbuilding capability will be lost.

We need to maximise the shipbuilding load, and the fleet solid support ships—ideally three of them, rather than two—could help that dramatically. It would also ensure the use of 90,000 tonnes of British steel, helping to maintain another strategic requirement for a nation such as the UK. However, the national shipbuilding strategy was very clear that the fleet solid support ships would be subject to international competition.

The Treasury line is that we should go to competition beyond the UK for cost reasons, but of course it does not look at the real cost to the nation of not building them here. No account is taken by the Treasury of tax paid by the shipbuilders and workers in those shipyards. It does not look at the loss of apprenticeships leading to high-skilled jobs. There is no look at the costs of retraining and unemployment in specific regions if these yards have to close, nor at the knock-on effect of a loss of jobs supported by the shipyard workers in that region, as has already been touched on by the previous two speakers. The Treasury also, strangely, seems to equate a job as a shelf-stacker in a supermarket with a high-tech skilled job in a shipyard. I am afraid that I do not see it in that way.

The national shipbuilding strategy announced that warships would be built in the United Kingdom on the basis of a competitive tender between UK shipbuilders, and that competition would help to ensure value for money and productivity, as is correct. It also said that companies could choose where to undertake the work. I cannot fault any of that but there is a hollow ring about the national shipbuilding strategy’s master plan that provides a 30-year forecast of Royal Navy shipbuilding requirements. It is far too vague and very short on specifics.

It has been stated that the strategy provides industry with greater certainty about the Royal Navy’s procurement plans—I have already talked about how these things can change quite dramatically—so that industry has the confidence to invest for the long term in its people and its assets, which is a very good thing. However, it does not do that. Where is the increase in frigate numbers promised by the Government? On what dates will they be built? Ditto the dates for the replacement amphibious ships. Why not have shortened timescales for the Type 26 programme? Where are the follow-on SSNs to take the numbers back up to the minimum requirement for eight boats? More detail is required for the small shipbuilding programmes. The demand by other government agencies, such as the Border Force, HMRC and the police, should be addressed as part of this package. The strategic position post Brexit means that we need to start building as soon as possible. Our exclusive economic zone and territorial seas are, I am afraid, wide open.

If the Government want industry to raise productivity and innovation and improve its competitiveness in the domestic and overseas markets, they must ensure a minimum shipbuilding base loading. I am afraid that at present that is not happening.

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My Lords, it is a pleasure to follow the noble Lord, Lord West of Spithead, who brings a wealth of knowledge and experience to these matters. I draw noble Lords’ attention to my interests as disclosed in the register, and I congratulate the noble Lord, Lord Berkeley, on tabling this debate. He and the noble Earl, Lord Arran, have given an accurate breakdown of the predicament of Appledore. I should mention that I had the honour of representing the constituency of Torridge and West Devon in the other place for some years, and Appledore shipyard was in my constituency.

Appledore, in its present form, was founded in 1855 and has been in existence continuously since that date. It started to construct ships for the Royal Navy about 75 years ago. It is a superb shipyard, and the talent and ability, enterprise and innovation that it has shown throughout that time has always been excellent. Appledore Shipbuilders had a substantial involvement in the construction of the new aircraft carriers.

Appledore has constructed ships for a number of private clients from overseas and a number of foreign navies. The standard of ships that it has constructed is outstanding. For example, HMS “Echo”, the survey ship, was constructed and completed by Appledore shipyard in 2002, and it has been at sea almost continuously since it was launched. This is just another example of the superb workmanship of Appledore and its outstandingly capable and innovative workforce. It also constructed HMS “Enterprise” and HMS “Scott”, the other survey ships, to the same extremely high standard.

I am unable to understand the logic of Babcock’s decision to close the yard, putting 200 jobs at risk. When I was Member of Parliament for Torridge and West Devon, the workforce was in fact far greater. To close such an excellent shipyard with such an outstanding workforce is nothing short of vandalism, especially in the light of the fact that the press reported that the Ministry of Defence offered Babcock work for Appledore to the value of £60 million, and I understand that further work has been offered to Babcock by the MoD. I am anxious to find out exactly what work was offered by the MoD and why Babcock dismissed these offers as not enough to secure the long-term future of the yard. It should be added that Appledore generated revenues of £24 million in the last financial year and has recently completed the construction of four offshore patrol vessels for the Irish navy.

I appreciate that the delays in the Type 26 and Type 31e frigate programmes will mean a hiatus for shipyards across the country, including Appledore, but surely the Government must look to other opportunities to retain the expertise of this important shipyard for the benefit of not only the country but North Devon in particular. I revert therefore to the offers made by the Ministry of Defence to Babcock and repeat that I should be grateful if the Minister would spell out exactly what was offered to Babcock as an inducement to continue to keep the yard open. This House will also be anxious to know what other shipyards or contractors have been approached or have approached the Government in connection with the Ministry of Defence work or, for that matter, other work to keep Appledore open. Appledore has an enviable record of high quality in the construction of not only military but civilian and merchant ships.

The Department for International Development may well need a vessel that can be used to bring supplies, hospital facilities and other humanitarian relief. Troops from 40 Commando Royal Marines—a unit in which, many years ago, I had the honour to serve—were deployed on humanitarian operations in the Caribbean after the terrible damage caused by the hurricanes last year. The unit distinguished itself in these operations and HMS “Ocean”, the amphibious assault ship, was vital in assisting. A helicopter is invaluable for humanitarian operations.

Will the Minister confirm that there is an understanding both in the Department for International Development and in the Ministry of Defence that such a ship can be used not only by the Department for International Development for humanitarian operations but by the Ministry of Defence for combat littoral strike operations? I should like a specific reply from the Minister on this, bearing in mind that HMS “Ocean” has now been sold to the Brazilian navy.

I stress that the Ministry of Defence should complete the Modernising Defence Programme as soon as possible. Orders for the Type 26 global combat ship and the Type 31e general-purpose frigate should be brought forward for urgent operational reasons; this in turn would end the shipbuilding hiatus. The Royal Navy is in desperate need of these ships. We have large aircraft carriers that will not have anything like the escort vessels needed. Frigates are also required for many other roles, including protection of our waters and sea lines of communication. A replacement for the amphibious assault ship HMS “Ocean” has been delayed, and we are in desperate need of a landing platform helicopter ship—an LPH.

Have the Government spoken to shipbuilders and other contractors that may be interested in taking a lease when Babcock leaves the site in March 2019? The people of this country deserve to be told exactly what is happening to Royal Navy shipbuilding and capacity. The outstanding workforce at Appledore deserve the respect and support they have so palpably and emphatically earned over many years and decades.

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My Lords, I am grateful to the noble Lord, Lord Berkeley, for introducing this Question for Short Debate. I agree with what he and all other noble Lords have said about the background to the yard, and I will not repeat all the arguments. We should not forget that the Appledore yard, under Babcock’s stewardship, successfully tendered for and built the Irish offshore patrol vessels against competition —I am quite sure that German yards would have tried very hard to get that order, yet Appledore still managed to secure it. It is an interesting point on labour relations that they built the last one without any difficulty.

I declare an interest as patron of the Steamship Freshspring Society, and Appledore has been very helpful to us. The steamship “Freshspring” is berthed at Bideford. Obviously it is advantageous to have a shipyard nearby, but any major works needed on the “Freshspring” would have to be commercially tendered for.

I imagine the Minister will tell us that there will be very limited direct employment consequences because—as the noble Lord, Lord Berkeley, and others have told us—the employees at the Appledore shipyard will be bussed to the Plymouth yard. I understand that quite a lot of them come from some distance away.

In the absence of strategic considerations, I do not wear rose-tinted spectacles and want to preserve all possible heavy industry—that is not where the money is. A lot of this work can be done much more economically overseas, which is why we have seen solid support ships built overseas. However, there are strategic considerations. Very few yards in the United Kingdom can build a complete warship, and Appledore is one. It has a large dry dock with overhead cranes and is covered from the elements so can work 24 hours if necessary. We simply cannot afford to lose this capacity.

It is easy to fall into the trap of believing that we will never be in a serious war or existential conflict. But recall the Falklands conflict, when the “Canberra” mysteriously received a new helicopter landing pad in a few days. That was a sudden, unexpected demand on the shipbuilding industry, but at the time we had the capacity to do it. Could we do it now? In my view, it is a strategic necessity to keep the Appledore yard available, even if we do not have work for it immediately.

A lot of skills, knowledge and experience are involved in shipbuilding. One only needs to think about the problems experienced on the Tyne. When we tried to build Bay-class ships there, it suddenly became very expensive because people had forgotten how to do it. The noble Lord, Lord West, touched on the problems with the Astute-class submarine, when people at Barrow-in-Furness had lost the skills to do the job.

I have outlined the fixed facilities at the yard, but an important consideration is what is called the movable plant. If it were dispersed, say in an auction, it would be much more difficult to recommence production at the yard. Will my noble friend the Minister do everything she can to encourage Babcock plc, which, I understand, owns the movable plant, to pass on the plant on reasonable terms to any viable future operator?

Finding new work for the yard will be challenging, as I am sure all noble Lords agree. Unfortunately, Babcock—for what may be perfectly good business reasons—only pursued military work. The problem is that, realistically, it is unlikely that any new awards will arrive in the next 12 months. The Government must therefore take action to preserve the capacity at the Appledore shipyard.

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My Lords, I thank my noble friend Lord Berkeley for securing this debate. It has been a good debate, albeit a short one, on a matter very important to our defence and economic interests. I appreciate that I am stating the obvious: we are an island—not a very big island—but we are also the world’s fifth-largest economy, a permanent member of the UN Security Council, a nuclear power and a major player in NATO. Protecting the seas around our island and keeping open the world’s shipping lanes for trade is essential to our very economic existence. To do that, we need a modern, well-equipped Navy crewed by highly trained and motivated personnel.

Alas, this Government have presided over the biggest reduction of our naval capabilities in our country’s history. As my noble friend Lord Browne of Ladyton said yesterday, the Navy now has fewer vessels than in 2003. Time and again, the noble Earl, Lord Howe, has had the unenviable task of coming to this House with the thinnest of arguments in support of the Government. It is only because of the high regard and respect for the noble Earl across the House that he has succeeded to some extent in assuaging the tide of criticism from all sides.

But on Tuesday night, when the noble Earl repeated a Statement on the Modernising Defence Programme, not a single Member from the Government’s party on the Benches behind spoke in support or even asked a question. To call it a Statement is something of an exaggeration. Patrick Kidd in the Times said that the Defence Secretary had “weaponised jargon”. My right honourable friend Kevan Jones said in the other place:

“If military strength was based on management-speak and general waffle, the Secretary of State’s statement would make us a world-beater”.—[Official Report, Commons, 18/12/18; col. 662.]

My noble friend Lord Tunnicliffe summed it up well with just four words when he said:

“It is essentially a classic ‘We will try harder’ Statement”.—[Official Report, 18/12/18; col. 1774.]

When the Government suspended the competition for the Type 31e in July, there was suspicion that the MoD had not received enough competitive bids. The process was restarted in August and on 26 November, the noble Earl, Lord Howe, told the House that the Government were committed to maintaining a fleet of 19 frigates and destroyers and that there would be a competition for building the Type 31e worth £1.25 billion.

Earlier this month the Government announced that they had awarded the contracts for the competitive design phase. Stuart Andrew, the Under-Secretary of State for Defence Procurement set out in detail the plan for a competition to build five Type 31e frigates. The MoD awarded three contracts for the competitive design. The contracts have been awarded to a consortium led by BAE Systems, Babcock and Atlas Elektronik UK and are valued at up to £5 million each.

However, a major concern is the affordability of the ships. The cost has been capped at £250 million each, which many industry experts worry is not feasible. Can the Minister say something to assuage our concerns on this matter? Can she share with the House details of how the Government have arrived at this £250 million figure? If she is not able to do so today, will she write to us?

Having said that, it is only right to state that we on these Benches are pleased that the process has been restarted. Indeed, we greatly welcome it. We believe it imperative that the MoD ensures that the programme proceeds to the planned timescale so that the ships can enter service as replacements for some of the Type 23 frigates. Can the Minister say something more about this? Can she confirm that the Government will give regular updates to Parliament on the progress? Are the Government completely confident that the timetable for the construction will ensure there is no time lag between the decommissioning of any Type 23 frigate and the entering into service of the Type 31e?

Will the Government undertake to keep Parliament updated regularly on the cost of the new frigates? Can she say what monitoring mechanisms will be put in place to ensure there are no cost overruns? This reassurance is necessary because, unfortunately, this Government have a very poor record on keeping within budgets. Indeed, the affordability gap in the defence equipment plan is now estimated to be somewhere between £7 billion and £15 billion.

Finally, I support the comments of my noble friend Lord Berkeley, and others, about the Appledore shipyard. Ships have been built there for 163 years, including, as my noble friend said, sections for the two new aircraft carriers. Some of the skills and trades at Appledore may not be found elsewhere in the United Kingdom. These are skills we can ill afford to lose, and I hope the Minister will have something positive to say when she replies.

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My Lords, I congratulate the noble Lord, Lord Berkeley, on securing an important and very well-informed debate on the subjects of the Type 31e frigate programme and the Appledore shipyard. I welcome the opportunity that this debate affords to highlight the progress being made by the Ministry of Defence towards the important issue of delivering the Type 31e programme and the also important contribution that the programme is making to realising the vision of the National Shipbuilding Strategy.

In 2016, the defence sector had a turnover of £23 billion and £5.9 billion of export orders. The Ministry of Defence is the sector’s most important customer. Last year we spent £18.7 billion with UK industry, directly supporting 123,000 jobs in every part of the UK. The 2017 sector examination, carried out by the MoD, with which noble Lords will be familiar, produced the analysis which duly informed the National Shipbuilding Strategy. That analysis was guided by the expert advice contained in Sir John Parker’s independent review. I have not the time available to go into details of the recommendations, but suffice to say that we accepted all of those that applied to government.

I noted that the noble Lord, Lord West, challenged a part of the review recommendations, but I have to say that my impression is that the National Shipbuilding Strategy constructed largely in that review has been widely welcomed. The noble Lord perhaps predictably questioned the number of craft actually available for deployment at sea. We are now building state-of-the-art vessels, deploying the most modern technology. That is introducing a flexibility of operation and deployment that was not previously possible.

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We are just coming up to the anniversary of the Battle of the North Cape where a very modern and high-tech German battleship was sunk because basically we had a battleship, two cruisers and 10 destroyers against it. They were not nearly as high-tech and modern, but numbers themselves have a strength.

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I am sure that the noble Lord and I could spend a happy hour or two engaging in a debate as to what constitutes an optimum naval facility, but I think it is acknowledged that, as with other areas of activity in the world, approaches and strategy in defence have had to adapt to what is now possible with the technologies available, which our predecessors did not have to hand.

Defence makes a contribution to the UK’s success as a major supporter of maritime equipment and systems through the work that it provides to build and support ships, both at the shipyards and in the wider supply chain. To continue to be successful, both the yards and the supply chain need to develop their global competitiveness for military and civil work. We need a modern and efficient shipbuilding industry. The importance of our Royal Navy to the defence and security of the UK and the significant level of investment by the Government in shipbuilding demand this.

The launch of the Type 31e programme represents a tangible first fruit of the National Shipbuilding Strategy. It is a pathfinder for the delivery of the new shipbuilding and capability vision set out in that strategy. As noble Lords are aware, under that Type 31e programme we will deliver a class of five ships at an average price of £250 million per ship. We want the first ship in service in 2023 and all five in service by 2028. The noble Lord, Lord Touhig, asked specifically about the costings of the programme, and I can say that we are confident that industry can rise to the challenge of building each Type 31e for £250 million; our growing defence budget, of course, is providing full funding for the remainder of the programme.

We believe that the industry can indeed meet that challenge. Following an intensive period of market engagement, a pre-qualification questionnaire was issued on 28 September 2018. I am pleased that the award of three contracts for a competitive design phase was announced to your Lordships’ House by the Minister of State for the Ministry of Defence, my noble friend Lord Howe, on 10 December 2018.

These contracts, as I said, are each worth around £5 million, and have been awarded to consortia led by BAE Systems, Babcock, and Atlas Elektronik UK. The contracts will fund the first stage of the design process, which will assess whether suppliers can deliver the Royal Navy’s threshold capability by the target date and within budget. I think the noble Lord, Lord West, asked about Babcock’s position in relation to the Appledore yard. It is a decision for Babcock to choose where it carries out the work, should it win that contract. That has to be a commercial decision for the company.

Concurrent with the award of the contracts for the competitive design phase, the Ministry of Defence has issued to each winning consortium an invitation to negotiate for the single design and build contract that we intend to place by the end of 2019. Conducting the competitive design phase, in parallel with the negotiations for the design and build contract, will allow us to award the contract earlier than would normally be the case in a major procurement. The noble Lord, Lord Touhig, asked whether regular updates would be provided to Parliament in connection not just with the 31e programme, but the Type 26 frigate programme. I am sure that the department will want to co-operate with whatever the reasonable demands of Parliament may be, and we would certainly want Members to be kept informed as to how matters were progressing. That will be a matter for discussion through the usual channels.

The approach to this contract is one that we all regard as an innovation. It is unusual; it is a contractual milestone, and is a testament to the Ministry of Defence’s positive engagement with the industry and the commitment to move the programme forward.

Turning to Appledore shipyard, it is, of course, a matter of deep regret that Babcock has decided to close the yard, which has such a lengthy and distinguished history. My noble friend Lord Arran spoke eloquently of the yard and its importance to north Devon. The noble Lord, Lord Burnett, with his extensive local knowledge, spoke cogently about the local community and economy, and my noble friend Lord Attlee spoke warmly of the yard and its capacity. I acknowledge all these comments.

Your Lordships will be aware that the Ministry of Defence spent £1.7 billion with Babcock last year, and the Appledore yard played an important role in manufacturing blocks for the nation’s two new aircraft carriers. I wish to acknowledge the skills and commitment of the Babcock workforce at Appledore, to which the noble Lord, Lord Berkeley, rightly paid tribute.

Babcock has also started work on a £360-million contract to be the technical authority and support partner for the Royal Navy’s new aircraft carriers and the fleet of Type 45 destroyers. However, following the completion of four offshore patrol vessels for the Irish navy, to which a number of your Lordships referred, Babcock has been unable to secure further work for its Appledore yard. The decision to close the yard has been taken by Babcock in the face of this long-term workload gap. It is Babcock’s commercial responsibility to make that judgment and take these decisions.

In this connection, I think it was the noble Lord, Lord Berkeley, who asked about UK fishery protection vessels. My understanding is that these are the responsibility of Defra, and the Royal Navy fisheries protection squad supports Defra, whose responsibility that function is.

The Ministry of Defence has explored a range of options with Babcock to secure the future of the yard, which included bringing forward a £60-million package of Devonport-based refit work. Unfortunately, no practical value-for-money solutions have emerged. I think it was the noble Lord, Lord Burnett, who asked me about the wider issue of a humanitarian ship for use by DfID following the decommissioning of HMS “Ocean”. The MoD remains able to provide a range of ships, including frigates, landing platform docks and survey ships of the Royal Navy and the Royal Fleet Auxiliary, to support DfId’s humanitarian work.

I am aware that it has been canvassed that the Ministry of Defence could bring forward work on the Type 31E or the fleet solid support ship programmes to support Appledore. Babcock is involved in both programmes. But neither programme is able to provide Appledore with the immediate work, or the certainty of imminent future work, that Babcock would need to retain the yard. As I have said, we expect to award the single design and build contract for the Type 31E in December 2019, while a contract for the fleet solid support ship programme, which is in the early stages of an international competition, is not anticipated before 2020. The future of the yard, following Babcock’s withdrawal, is ultimately a matter for the landowner. I understand that Babcock has said that it is working to offer new opportunities, including transfers to Devonport, to as many of its 200 employees as possible.

I think it was the noble Lord, Lord Burnett, who asked what the Government were doing about the current situation. The Department for Business, Energy and Industrial Strategy is engaged with local and national stakeholders regarding plans for the future of the Appledore site. The department is also looking to engage with the current owner of the site to offer support in finding a buyer. More widely, the Devon and Cornwall Business Council is setting up a taskforce to look specifically at this issue, and I understand that it met for the first time last week.

I was very encouraged and pleased to hear from the noble Lord, Lord Berkeley, that there is hope that a buyer may be found for Appledore. The Government will, of course, welcome any development that may preserve jobs at the site. However, I must emphasise that any such plans for the future of the yard following Babcock’s withdrawal are ultimately a matter for the landowner and the commercial interests involved. I think it was my noble friend Lord Attlee who asked about the plant currently at the yard. That is an important point, but it is a decision for Babcock. I assure your Lordships that the Government recognise the impact that the closure of the yard will have on local communities.

The noble Lord, Lord Berkeley, raised the issue of a new Scillonian ferry. I have been a very happy holidaymaker to the Isles of Scilly on one occasion—although I have to confess that I flew there; I did not go on the “Scillonian”. It is important for potential visitors to be encouraged to travel to the islands and to have the means of doing so, and that is a matter for the new transport board for the Isles of Scilly and the Isles of Scilly Steamship group, to reflect upon. Their vision may include a plan for the replacement of assets such as the “Scillonian”, but even with the buy-in of all, that is not a precise way forward. A lot of planning will have to emerge and become clear from such a vision, if that is what is ultimately intended. I should make it clear that the provision of a new ferry is a commercial decision for the new transport board. It is difficult to see anything in the possible provision of a new ferry that could help alleviate the immediate lack of work at Appledore now.

The Government remain committed to ensuring that services to and from the Isles of Scilly are maintained and secured for the future. However, we must be clear that these have to operate on a commercial basis. We do not wish to interfere where there are commercial solutions to any transport challenges faced. We expect that to become clearer once the transport board has established its future vision. I thank the noble Lord again, and all contributors, for an interesting and helpful debate.