Defence Procurement and Supply Chains

I beg to move,

That this House has considered defence procurement and supply chains.

It is a great pleasure to serve under your chairmanship, Sir Charles. I am most grateful to hon. Members for participating in this important debate. I especially want to thank the Minister for Defence Procurement for being here today. I look forward to working closely with him on this issue in future and would welcome the opportunity to meet him to discuss the matter further.

The question before the House is broad and multifaceted, with profound implications not only for the UK’s national security, but for the domestic industry and the many left-behind towns that are home to Ministry of Defence suppliers. I hope that, in the short time available to us, we will have a suitable and wide-ranging discussion.

I warmly welcome the breadth of experience that hon. Members bring to today’s proceedings, whether they have served in our armed forces or come, as I do, from a trade union background or have experience in Government.

Today’s debate could not be more timely. It takes place amid an economic crisis unlike any in recent memory. Across the country, joblessness continues to soar and unemployment might hit more than 3 million by spring 2021. British industry has been especially hit badly by covid-19 and the resulting lockdown. Already we see a haemorrhaging of jobs across the sector, with left-behind towns in the north and midlands bearing the brunt.

Thousands of workers at companies such as Bentley, Airbus and Safran Nacelles now find their jobs under threat. The scale of the crisis has been starkly illustrated by the situation of Rolls-Royce, Barnoldswick, where operations have been offshored and striking workers locked out of the plant just before Christmas.

The job losses are not confined to plant manufacturing sites. Wider supply chains have been devastated as well, with 5,000 lost in aerospace alone. As the Institute for Public Policy Research has demonstrated, redundancies in this sector have a disproportionate impact on local economies, compounding the already high levels of deprivation and joblessness found in towns such as Birkenhead.

Meanwhile, the UK is struggling to adapt to a fast-changing and volatile global situation. Our departure from the European Union risks leaving us more isolated on the world stage, while the threat posed by non-state actors and cyber-terrorism continues to grow. My argument is simple: defence procurement has a vital role to play in helping British industry to survive the current crisis. The demand for British manufacturing has slumped, but the need for high-tech cutting-edge defence projects remains as pressing as ever, and British suppliers are well placed to meet the demand.

The Chancellor stated in the spending review that there would be additional funding of more than £24 billion in cash terms for defence in the next four years, including more than £6 billion for research and development. The Government say that they are serious about levelling up the UK and building back better. If that is the case, it is imperative that the additional funding goes towards projects that sustain high-skilled employment and provide quality training opportunities to young people across the country.

The argument is not just an economic one; it is also about national security. When the pandemic first struck, it exposed dangerous vulnerabilities in international supply chains. If we are to keep Britain safe in an uncertain world, we must maintain sovereign capabilities and build up our onshore defence industry. We have heard a great deal in recent years about the supposedly draconian restrictions placed on the UK by the European Union, but where our European neighbours rightly exploit the freedom afforded to them on defence procurement, the UK all too regularly buys off the shelf and undermines British industry by opening up defence contracts to international competition. It is not just British manufacturers that lose out, but the British people through the loss of taxes, GDP growth and high-skilled jobs, which are already all too rare in a modern economy. That is why the public overwhelmingly support prioritising British manufacturers for defence projects.

There have been promising developments in recent years. In fact, there is a growing consensus that defence procurement has a vital role to play in supporting domestic industries, and making the UK more secure by improving sovereign capabilities. That was recognised in the 2015 strategic defence and security review, which called for promoting prosperity to be recognised as a core national security objective. It is similarly reflected in the national shipbuilding strategy proposal that defence vessels should only be open to UK competition and the incorporation of a national value framework into the combat air strategy.

There remains much more to be done. My party has called for a new defence industrial strategy that expands the definition of good value to include support for British manufacturers, small to medium-sized enterprises, and the high-skilled jobs that they create. I want to talk about what that would mean for the shipbuilding industry.

British shipbuilding and ship repair is a £2 billion industry that regularly employs 32,000 people in the UK and supports 20,000 jobs in the wider supply chain. Shipbuilding also accounts for 60% of defence spending in the north-west, and of course I have the great privilege of my constituency being home to the historic Cammell Laird shipyard. Despite significant challenges in recent decades, Cammell Laird has continued to provide high-skilled jobs and meaningful training opportunities to 700 people in Birkenhead. It is staying ahead of the curve. Just last month, it launched the RRS Sir David Attenborough, perhaps the most technologically sophisticated vessel produced in this country in the past three decades. As a passionate advocate of vocational training, I am delighted that it continues to provide opportunities for young people in my constituency. More than 300 young people have been offered apprenticeships in the past decade, with 51 starting this year.

Now Cammell Laird stands to benefit from the construction of the new fleet solid support ships for the Royal Fleet Auxiliary. Along with Babcock International, Rolls-Royce and BAE Systems, Cammell Laird is part of a team UK consortium that was shortlisted for the contract before the competition was suspended last November. Those companies represent the very best of British manufacturing and the benefits of building those ships in the UK are obvious. It would create or secure at least 6,500 jobs across the country, including hundreds at Cammell Laird. Of the £800 million spent on the new support vessels, at least £250,000 would be returned to Treasury coffers through income tax, national insurance and lower welfare payments. That is why I welcome the announcement by the Secretary of State for Defence that the vessels will be classified as warships, guaranteeing that they will be built in Britain.

That is in line with the recommendations contained in Sir John Parker’s inquiry into the national shipbuilding strategy, but I am now hearing concerns that the Ministry of Defence could accept bids from consortiums including and even led by foreign companies. I echo the calls of my right hon. Friend the Member for Warley (John Spellar), the Vice-Chair of the Defence Committee. The Government must provide cast-iron guarantees that the ships will be built in British shipyards. I hope the Minister will be able to provide us with that assurance today.

Building the ships in Britain will not just benefit the hundreds of workers who will be guaranteed gainful employment for another decade or the young people whose horizons will be expanded through the provision of quality apprenticeships; it also means more work for the countless suppliers who provide the shipyards with parts and logistical support. It will mean more money spent in our town’s shops, restaurants and hospitality venues, which have been so devastated by the national lockdown, and it will mean more revenue for our local council, which is working tirelessly to support some of the poorest and most vulnerable people in the country. In short, it will mean hope for the town of Birkenhead.

The fleet solid support ships are not the only defence project that has a role to play in kick-starting the economy. There are many others, perched on the slipway and ready to launch. This includes the new tranche of Typhoon combat aircraft, the Merlin Mk 2 helicopters and the Boxer armoured fighting vehicles, which are all ready to go into production. By placing an order for the new Type 26 frigates now, the Ministry of Defence could get the supply chain for long-lead items running. The Government should also consider bringing in phase 2 of the Tempest project, which has been scheduled for 2022 and 2023. Those are the kind of shovel-ready projects the Prime Minister has spoken about so often.

In short, this is not a plea for little England-style nationalism; it is about providing a practical and effective way of rebuilding British industry so that it can address the needs of people in this country in the face of years of neglect and decline. By ensuring that these projects are built in Britain, the Government have the opportunity to prove that they mean what they say about levelling up and building back better. It is in their gift to provide towns such as Birkenhead, Barnoldswick and Barrow-in-Furness with the jobs and training opportunities they deserve.

Last month, Remembrance Sunday provided us with an opportunity to honour not only those who have served in previous conflicts, but all those who continue to keep Britain safe. It is incumbent on us, in turn, to ensure that they are as safe as they can possibly be, and that means ensuring that they are equipped with state-of-the-art equipment, all built in Britain.

I call Simon Fell. I will give Mr Fell four minutes, but that is it.

Thank you, Sir Charles. I will try to be quicker than that. I thank the hon. Member for Birkenhead (Mick Whitley) for securing this important and timely debate. We keep hearing the phrase “levelling up” and the hon. Gentleman mentioned it. The Prime Minister tells us that it is his mission to level up the country, and for communities such as mine in the north that is a welcome prospect. We need to recognise just how important the defence supply chain is to that agenda.

In my constituency, we build the nuclear deterrent, and when I say we, I mean 10,000 of the most skilled, world-leading workers imaginable building submarines with a complexity rivalled perhaps only by what NASA does. That work—the completion of the Astute-class boats and the delivery of the four Dreadnought-class boats—is the beating heart of Barrow and Furness and our local economy.

Not to labour that metaphor, but if the work in the yard is the heart, then the supply chain is the blood that runs through our communities, keeping our businesses alive through Cumbria and beyond. The supply chain spend alone was £1 billion in 2019 from the submarine programme. That supports 80-plus businesses in Cumbria, but it does far more than that. It trains apprentices and creates skills clusters that attract even more businesses and further investment. Used well—don’t get me wrong, I would far rather see more supply chain spend in Cumbria—defence procurement can be transformative.

BAE in Barrow has recognised what it needs to do to invest in our communities to do its job well. To produce boats to a steady and reliable drumbeat, it needs to invest in our towns to make sure we can stand on our own two feet and that we are creating the people with the skills to keep fuel in that machine. I applaud it for acting in that way. It backed our local schools and college, it led Barrow’s successful town deal—I especially give credit to Steve Cole from BAE on that—and it is championing a learning quarter in our town, which will bring a university campus into Barrow and address the fundamental problem that towns such as mine have, where there is a brain drain of young people leaving to the bright lights of big cities like Manchester and Liverpool.

I call Christina Rees. You have four minutes.

It is a pleasure to serve under your chairmanship, Sir Charles. I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley) on securing this debate.

Aerospace and defence are inextricably linked, and are a cornerstone of the Welsh economy. Last year in Wales, the sector had a turnover of £6 billion, which is 10% of the UK total, and it employed 23,000 people before covid-19. In Wales, we have Raytheon Technologies’ airborne surveillance aircraft division at Broughton, BAE Systems at Glascoed, General Dynamics at Oakdale and Merthyr, Airbus Defence and Space at Newport, Thales at the National Digital Exploitation Centre in Ebbw Vale and West Wales airport in Aberporth. I welcome today’s news that the Ministry of Defence has announced that BAE has secured a new £2.4 billion next generation munitions solution contract, which will sustain 4,000 jobs in the UK over 15 years, with 550 of those at Glascoed.

The Welsh Government have provided support mechanisms for innovation and manufacturing in the defence sector. I will mention just two. The advanced manufacturing and research institute at MOD Sealand in Flintshire is unique in providing the UK with a defence-led R&D centre of excellence, which will create a technology and innovation cluster aligned to emerging technologies and capabilities, with long-term commercial opportunities.

The second project is Thales’ NDEC, which was opened in Ebbw Vale at the beginning of the year, supported by Welsh Government funding and in partnership with the University of South Wales. It will increase the cyber and digital knowledge base across business, education and academia, and will focus on protecting critical national infrastructure. There are opportunities for Thales in Tempest, as well.

Those two projects are examples of the Welsh Government working with the private sector, in partnership with the MOD. I call on the Minister to maintain and enhance this relationship to develop Britain’s sovereign capability, support economic growth across the UK’s nations and regions, and promote a levelling-up agenda that includes a positive weighting for British-based and Welsh companies for MOD procurement.

I call Grahame Morris. You have four minutes, although you do not need to take four minutes if you do not need them.

Thank you, Sir Charles. I thank my good and hon. Friend the Member for Birkenhead (Mick Whitley) for securing this important debate, which is particularly timely given the extra £16 billion of defence funding that was announced in last week’s spending review.

Defence contracts represent an excellent opportunity for the UK economy and for job creation and retention in Britain. It is vital—I am addressing these remarks to the Minister in particular—that defence projects have a domestic focus, with a particular emphasis on maintaining jobs and the skills base in the UK.

Unite members at the Rolls-Royce site in Barnoldswick are currently being forced to take industrial action, because Rolls-Royce is cutting 350 highly-skilled jobs and offshoring them to Singapore. Workers at the plant fear that this latest round of job cuts will spell the end of the site itself, as it will likely become unviable as a result. The Barnoldswick workforce actually helped to set up the Singapore site, having been given promises that it would never put the home site at risk—a gross betrayal of loyal staff.

Unite the union understands that this work will remain at the site in Barnoldswick, at least for now, due to international arms trafficking regulations. However, the latest job cuts at Barnoldswick call into question the very viability of the site, and whether work on the joint strike fighter lift fan blade will be transferred to Singapore.

While Singapore may be a safe and secure country at the moment, there are concerns that this technology needs to be protected. On the 80th anniversary of the battle of Britain, the striking workers rightly believe that it is a disgrace that the Barnoldswick site is under threat, given its heritage and the important role that it played in supplying the components for Merlin engines, which kept the Spitfires flying in the battle of Britain.

It is an honour to be called to speak in this important debate, Sir Charles. Having served in uniform for many years, I know a bit about defence procurement. I am also privileged to have used some of the best British-made equipment in the world.

In 2018-19, the Ministry of Defence spent £19.2 billion with UK industry and commerce, deliberately supporting 119,000 jobs. It is jobs that we are talking about today. In 2020, our commitment under the spending review is to spend an extra £16 billion, on top of the extra £8 billion that was promised in last year’s manifesto. That is exactly what the Ministry of Defence and our defence industry have been waiting for. Keeping people safe is the primary role of Government, but it is also about providing the commitment, the certainty and the spending guarantees that allow our nascent defence industry to plan ahead, at what is now well over 2% of GDP.

In the time I have today, I want to emphasise three key things. First, we have fantastic equipment in the UK. I am confident that, in the main, our forces have what they need. Secondly, I am proud to serve under a Conservative Government that get defence. Thirdly, we must spend responsibly and flexibly to secure what we need and to keep our British defence industry at the forefront of R&D, and to be able to produce competitive exports.

What do we have to be proud of right now? Lightning II, the F-35B aircraft, is an advanced, fifth generation aircraft, but it is American. Typhoon is another fantastic aircraft, and almost British. The Dreadnought to come is British, and is being built in Barrow. Our Astute boats are again British and being built in Barrow. The QE2 carriers—two of them—are British. Ajax is integrated in the UK, although it is not a UK platform. Type 26 frigates are British, Type 31 frigates are British, and the fleet solid support ships are British.

That is all good so far, but there is a note of caution. The message for post-Brexit UK is that we need to export our way out of trouble. To do that, we must showcase what we make and build. When we have a UK-based product or project with export potential we must back it, even if it involves some security compromise. We must also lower production costs to make it fit for the export market. We must develop a longer-term strategy to design and build UK equipment. That will avoid often substandard commercial off-the-shelf solutions. The UK must also design with export in mind. Expensive platforms are all very well, but we need to be able to sell them to those who do not have a huge amount of money in comparison, particularly to our emerging allies. As for legacy EU competition rules, the simple answer is no.

As everyone has been so well behaved, speakers can now have five minutes.

I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley) on securing the debate. He listed a number of criteria for people to be here. I tick two of the boxes: as a former union national officer and as a Minister. Indeed, I have been campaigning on this issue for many years, including when I was a Minister. I think colleagues need to understand that, underlying the debate, is a deep sickness within our civil service, which disregards, and even has a contempt for, manufacturing. It is laughable that we are having a debate with the EU over state aid when the Government refused to use the powers that they already have under European regulations. Quite frankly, other countries do not have to do that.

Let us take the example of the fleet solid support ships. France and Italy have ordered ships and prescribed that they be made in their own yards, and the same is true of the Germans. They use, interestingly enough, a foreign design, but they stipulate that the ships have to be built in German yards. There should never have been a question about this. There should have been a lot of work for our shipyards that would maintain a flow of work for the supply industries and, in particular, for the steel industry. Now there has been a welcome development in that the Secretary of State, who previously said that he would be putting out the invitation to bid in the spring, told a recent hearing of the Select Committee that that would happen shortly. I hope that that means that we are bringing that work forward. The Minister will be pleased to learn that I have been drawn to take part in Defence questions next week, when I shall be pursuing this issue.

We need to press on and do what would be taken as read in other countries. Companies understand that. They understand that if they are to sell in those other countries, they have to have substantial manufacturing bases there. Here they believe they can get away without having that. Furthermore, in its assessment of contracts, the Treasury refuses to consider the 30-odd per cent. that will come back to the Treasury directly in the form of the taxes paid by the workforce.

I call Kim Johnson—five minutes.

Thank you, Sir Charles. I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley) on securing this timely and important debate. I welcome the opportunity to speak during this debate and to call on the Government to provide a multibillion pound boost to British jobs and to back British manufacturing by placing the defence orders that they have delayed over the last five years.

The UK is right now staring down the barrel of the biggest recession of any G7 country, on top of a decade of austerity and several more decades of disinvestment in manufacturing and industry in this country. We have been promised time and again that this Government will level up the economy by investing in our manufacturing sector. Protecting jobs and creating new ones will be the quickest way to get the country out of the economic crisis. Spending by the Ministry of Defence supports 119,000 jobs in the UK and nearly 4,500 apprenticeships—that is one in 220 jobs.

Strategic investment in our industrial and manufacturing infrastructure will play a vital role in ensuring that the British economy is able to weather the economic crisis resulting from the coronavirus pandemic. It will focus investment outside London and the south-east in areas that have suffered from a historic lack of investment and that are in desperate need of support to get through this crisis, particularly in the north-west.

The Confederation of Shipbuilding and Engineering Unions, representing over 100,000 skilled industrial and manufacturing workers, has called for the prioritisation of nine major shovel-ready defence projects to directly safeguard nearly 13,000 jobs during the recession. This investment will benefit the wider economy, cascading into supply chains, including thousands of small businesses across the country that supply components and software. I ask the Minister to commit today to protect all north-west defence jobs and to stimulate domestic industry at a crucial turning point in our economy by bringing forward spending for defence jobs, such as the fleet solid support ship, Type 26 frigate and phase 2 of the Tempest project. Lastly, I ask the Minister to intervene to stop Rolls-Royce from offshoring to Japan, Singapore and Spain and to protect all 350 jobs at the Barnoldswick site.