To ask Her Majesty’s Government what assessment they have made of the value for money to the taxpayer of building the new Fleet Solid Support Ships in (1) the United Kingdom or (2) overseas; and whether any such assessment includes (a) the level of tax paid onshore, (b) any requirement to maintain skilled jobs, and (c) any strategic requirement for a minimal shipbuilding capability in the United Kingdom.
My Lords, it is too early in the procurement process to assess the value for money of building fleet solid support ships in the UK compared to overseas, and it would be inappropriate to comment in advance of a new competition. The Secretary of State has already said that he will make an announcement about the progress of the programme during the autumn, and the criteria for assessing the FSS bids will be produced in accordance with Her Majesty’s Treasury guidelines on seeking best value for money.
I thank the noble Baroness for her Answer. I am delighted that the Secretary of State has classed Royal Fleet Auxiliary vessels as military. These three ships should have been ordered more than three years ago. I hope that the integrated review is concluding that our outward-facing island nation needs a maritime strategy as a basis for its national security. Will the Minister confirm that a maritime strategy needs ships, that the UK’s shipbuilding strategy needs ship orders and that building of military ships will be onshore?
I reassure the noble Lord that it would be a very curious defence capability that did not have a maritime capacity. As we look to the challenges of the global world in the years to come, it seems that a maritime capacity will be an essential part of our capability. The Government are aware of the importance of the UK’s maritime industries. As the noble Lord will be aware, the Prime Minister appointed the Secretary of State for Defence to be the shipbuilding tsar for this very reason. The challenges which the noble Lord articulated are recognised.
My Lords, on the possibility of awarding this contract within the UK, hopes have been raised and dashed countless times over the past few years. Does the Minister agree that the UK’s post-Covid industrial recovery strategy must weigh up the benefits of enabling some 6,500 skilled jobs in the shipbuilding industry against the long-term damage to people, local industries and the wider economy of losing those jobs? Will the Government support retention of shipbuilding by awarding these contracts within the UK?
Like the noble Baroness, coming from Scotland, I am well aware of the significance of shipbuilding to Scotland, not least to our communities on the Clyde. The process has been put in place to proceed with the three new fleet solid support ships. Making them exempt from the EU procurement regulations will put us in a position to make informed decisions as to the approach that represents the best chance of success while realising our ambition to bring shipbuilding home.
I think the noble Lord is being slightly mischievous in his question and understands that I cannot make a specific response in the way in which he would desire. What I can say is that the Government are well aware of the significance of our indigenous UK shipbuilding capacity. We are engaged in a process in respect of the three new ships. As I said to the noble Lord, Lord West, the criteria for assessing the bids will be produced in accordance with Her Majesty’s Treasury guidelines, seeking best value for money.
My Lords, while we are talking about value for money to the taxpayer in defence spending, I am sure that my noble friend noted the immensely valuable and highly effective work done by the Armed Forces in this coronavirus crisis, particularly with the Nightingale hospitals and in testing. When she goes to various discussions about the security review, can she note that we need a large defence budget and a large pool of manpower to be effective in cases such as this?
My noble friend will be aware that the integrated review, which I think is the review to which he refers, is concerned with the broad and difficult question of what threats we face and whether we have the capability to meet them. That is the question which has to be resolved by the review process. The Government are acutely aware of the significance of defence to the United Kingdom. He is absolutely right: the MoD has played a proud and effective role in supporting our public agencies and other entities during the pandemic.
My Lords, the Minister has twice referred to the Treasury guidelines on procurement, but the other area where the Treasury is hugely important is in agreeing the size of the defence budget. We have had a Budget postponed this year. Is she confident that the resources will be there for three support ships?
I reassure the noble Baroness by reminding her that this Government have a proud record in relation to our commitments for budget to the MoD. We had a clear manifesto commitment to continue to exceed the NATO target of spending 2% of GDP on defence as well as to increase the budget by at least 0.5% above inflation every year of this Parliament. As she is aware, we are the largest defence spenders in Europe and the second-largest in NATO.
When a ship is built, we immediately look at the hull and structure. Steel is vital to the UK’s manufacturing industry. Does my noble friend the Minister agree that this is also about retaining capability of repairing sophisticated, highly technical ships? What support is being given to recruitment in technical apprenticeships, which are critical to our continued sovereign capability?
I am pleased to say that, broadly speaking across the UK, defence supports more than 300,000 jobs in the private and public sectors. I know at first hand that a number of them include modern apprenticeships. I have met some of those apprentices, and they are not just a tremendous advertisement for the talent, particularly among youth, within the country but a tremendous reassurance about the continued provision of skills to our essential industrial partners.
On 5 November, it will be one year since the Government suspended competition for building the fleet solid support ships. Sir John Parker, who wrote the review of the implementation of the National Shipbuilding Strategy, recommended at the time that
“UK-only competition should be considered for future defence-funded vessels.”
Have the Government accepted Sir John’s advice? Will they get on with the job, or will the words “dither and delay” as well as “incompetent” come to mind whenever people speak about this Government?
I feel slightly wounded by the noble Lord’s charge; I shall try not to take it personally. Of course, there was disappointment at the paucity of interest when the contract was originally put out. I think that it is now recognised that there were perhaps reasons for that. An internal review then carried out by the Royal Navy was helpful in ascertaining exactly what the role of the fleet support ships was to be and what they were meant to do, particularly in relation to the carrier strike group. Based on that review, we were able to make informed decisions as to the approach that best represents what we need to make a success of that support role. As he may be aware, the prior information notice, which set out the details being sought, indicated that there is a revised design for the ships. I am pleased to say that, in response to that notice, there has been a very healthy level of interest.
My Lords, will the Minister confirm that in the new support ships programme the overriding priority will be best value for the UK defence budget? Might this involve giving orders to consortia, including British and foreign companies working together? Has the impact of any delay in delivery of new ships beyond the end of the service life of Royal Fleet Auxiliary “Fort Victoria” been costed?
We are aware of the scheduled end of service for “Fort Victoria”, which is in 2028. We are satisfied that we can make the necessary arrangements to continue the support which will be required. On delay, as my noble friend will be aware, the National Audit Office has made it clear that it is too early to say what impact stopping the original competition process might have on the entry into service of the fleet solid support ships. We will seek to mitigate any delay, and we shall certainly assess—as we are currently doing—the interest of those parties which have responded to the prior information notice process. We hope to proceed to make further information available to Parliament on the procurement strategy.