Oral answer (Lords) on Shipbuilding: Warships - Nov 14

To ask Her Majesty’s Government what assessment they have made of the impact that the process for awarding contracts for building complex warships will have on shipbuilding in the United Kingdom.

My Lords, as set out in the national shipbuilding strategy, the Type 31e programme is the pathfinder for a new streamlined competitive procurement process which allows the Ministry of Defence to work collaboratively with industry to deliver warships to meet the Royal Navy’s needs. The Type 31e procurement is still under way. However, industry has welcomed the approach, and initial engagement indicates a healthy interest throughout the supply chain.

I thank the Minister for his Answer, but there is a strong case for awarding contracts for all Royal Navy ships, including those serving under the Royal Fleet Auxiliary, to UK shipyards. The Government are making an unnecessary distinction by insisting on putting RFA ships to international tender. Does the Minister agree that awarding these contracts to UK shipbuilders would provide certainty, and enable shipyards to grow in size and capacity, train more apprentices, help sustain their supply chains and, importantly, keep prices down? Does he also agree that this would be one of the MoD’s objectives: to contribute to UK prosperity?

My Lords, I absolutely share the noble Baroness’s ambition for the prosperity of the UK shipbuilding sector. Future warship procurement will be restricted to UK-wide competition for reasons of national security. However, we think it right for other naval ships to be subject to open competition. This is not just because of the rules of the EU treaty. Of course, we hope that UK shipyards will be able to compete for those contracts, but they will win them only if they are internationally competitive. It is that competitiveness that will ultimately secure their prosperity, not only as suppliers in the UK context, but as potential exporters in the global marketplace.

Will my noble friend tell the House what effect he thinks the recent announcement in the Budget of an extra £1 billion for the Ministry of Defence will have, not only on the building of complex warships in the United Kingdom, but on the wider operational activities of the Ministry of Defence?

I am grateful to my noble friend. As the House will be aware, the Autumn Budget gave defence a further £1 billion between now and 2020, in addition to the £800 million of in-year support that we received earlier this year from the Treasury. We have not yet allocated precise sums to particular programmes, but there is no doubt that the additional funds represent a substantial boost for defence. It means that we will be able to modernise some key capability areas. Offensive cyber, anti-submarine warfare and protection of the deterrent are some good examples. Importantly, it also means that we do not have to make any cuts to the force structure or changes to our capability plans.

The Type 31 order seemed to have something of a derailment earlier this year. Will the Minister confirm that the original in-service stage is being held?

Yes, we want the first ship in 2023, with five ships delivered by the end of 2028 to replace the five Type 23 general purpose frigates.

My Lords, given that the National Audit Office report of 5 November concluded that the Ministry of Defence equipment budget remains unaffordable by as much as £14.8 billion, where will the money come from to build complex warships?

My Lords, that worst-case prediction is a forecast over 10 years. We have plenty of time to manage the budget, as we always do, to make sure that we can deliver our very ambitious equipment programme. Work is in hand to do just that.

My Lords, there has been a lot of talk about shipbuilding but very little building. It seems to me that we have to get a grip on things such as the Type 26 programme. We will now wait for six or seven years for the first frigate to appear, carrying all the costs of that yard, rather than pushing ahead, ordering all eight, getting all the long lead items and actually delivering them one a year. It seems that we are not grasping these key fundamental issues. The Solid Support Ships add into the programme, but we do not look at the real cost to the nation of not building them here in this country.

My Lords, as regards Type 26, it is true to say that ordering ships in batches is normal commercial practice. For one thing, it enables lessons learned in building the early batches to be reflected in lower prices for the later ships, which of course achieves better value for money overall. Contracting for all eight ships up-front would have precluded us from benefiting from the potential economies of scale, which may now come from the successful export campaigns to Australia and Canada.

My Lords, can my noble friend say how many destroyers and frigates are presently available for Royal Navy service and how many of them are fully crewed?

My Lords, all the frigates and destroyers that the Royal Navy has at its disposal are in one way or another fully operational. They may be subject to training of crew, they may be alongside having refits or they may be on deployments, but none of them is non-functional.