Defence Industrial Base

Question

15:05:00

Asked by

To ask His Majesty’s Government what steps they are taking to support the defence industrial base.

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a member of the Army Board.

My Lords, our new defence industrial strategy will make sure that national security and a high-growth economy are aligned to deliver the changes we promised: cracking down on waste, building resilient supply chains and boosting Britain’s defence industry. By strengthening our relationship with industry, innovators and investors, we will make it easier and more attractive than ever before to do business in defence.

My Lords, the Prime Minister’s EU reset supposedly opens the door for the United Kingdom to participate in the European Union’s €150 billion defence procurement fund. However, there were reports over the weekend that France is now insisting that any beneficiary of that fund—any project—will have to have 85% EU content. That would be a disaster for UK industry. Can the Minister reassure your Lordships’ House that the Government will seek cast-iron guarantees that before they put any money into the fund, it will be a level playing field without artificial restrictions so that UK industry can compete fairly against its EU counterparts?

The noble Lord makes a point the Government themselves would make: access to the €150 billion Security Action for Europe fund is really important. Of course, we will act in the best interests of the UK and ensure that British industry is protected as far as we possibly can. The only reason we can access that money, under whatever terms we are able to negotiate and discuss with our European friends, is because we have a security and defence partnership. Without that partnership, which the British Government and the Prime Minister negotiated successfully with the EU, we would not be able to bid for the money or be involved at all. So I take the noble Lord’s point, but we should also think that the Government have done well to negotiate the security and defence partnership.

My Lords, do the Government themselves not also have to place orders with British companies? Like me, does the Minister regret that the previous Administration gave the contract for the fleet solid support ships to a publicly supported, publicly owned foreign shipyard, to the detriment of work in the United Kingdom? Does he also accept that the defence industry depends on a supply chain that supplies both civilian and military use? Therefore, should we not be looking at rebuilding British industry and buying British?

My noble friend makes an important point. He will know that one of the actions of the Government was to see the fleet solid support ships now built in Belfast. That is a really important success that the Government have had. But he is also right that we must ensure that, as far as we can, we rebuild the sovereign capability of our country to have the defence industry it needs. Let me be clear: the sovereign capability of our own industry is now a national security requirement. One thing that Ukraine has forced us to do is to wake up to the fact that we need our own industry, as well as depending on others.

My Lords, can the Minister explain whether the proposed SME support hub has been established and how many SME businesses the Government anticipate will engage with the hub? Furthermore, will the Government urge engagement from SMEs from every region of England?

There used to be something called the Defence Suppliers Forum, but it did not include SMEs. We have established the Defence Industrial Joint Council, which, as well as big industry—the primes—will include small and medium-sized businesses. The noble Baroness makes a good point; another thing we have learned from Ukraine is the agility and adaptability of small companies and businesses, which have shown their worth—clearly, we need to grow them. The number of small and medium-sized companies will grow over the next few years through the Government’s determination to grow all sectors, including the SME sector.

My Lords, what steps have the Government taken recently to reconcile the possible risk of failures in developing novel defence capabilities against the need to ensure that government funds are paid out with due care and avoidance of unnecessary risk?

The noble and gallant Lord asks a good question. We have reinvigorated and put more money into the defence innovation fund. With respect to defence, you cannot move forward without innovation, challenge, new technology and new ideas. One of the lessons from Ukraine is that sometimes, for not an awful lot of money, innovators—those who think for themselves—provide the defence equipment and security that we need. Of course, we must be sensible and not throw money away and waste it, but innovation is an important part of any defence industrial strategy, which is why it was mentioned in the defence review and why the Government are putting more money into it.

My Lords, the strategic defence review is an admirable blueprint for what our defence capability should be. But, as it stands, it is devoid of any specific information about implementation. The Government have accepted the 62 recommendations from the reviewers, but they have given no detail about how or when they will deliver them. We know the review was predicated upon a defence budget of 3% of GDP. I ask the Minister: when is that 3% is happening and is it sufficient to implement the recommendations fully?

The Prime Minister has been very clear about his commitment to ensure that the 62 recommendations are properly funded. The noble Baroness will know that the 3% is a commitment in the next Parliament, should the economic circumstances allow us to do so. The Prime Minister’s commitment is absolute, with respect to funding the defence review, and the noble Lord, Lord Robertson, accepts and understands that. As to when we will lay out the capabilities, the noble Baroness knows that alongside the defence review and the defence industrial strategy, in the autumn there will be a defence investment plan. This will be a line-by-line outline of the capabilities and choices needed to deliver the defence review according to the budgets that have been set.

My Lords, I ask my noble friend the Minister: does the Treasury now understand that all this military equipment requires a drumbeat of orders? For example, if you want 30 frigates and they have 30-year life, one frigate has to roll off the production line every single year, year after year. The same goes for all other types of equipment. Historically, we have ordered little batches and then there has been a gap, so SMEs lose trade and cannot do anything. Then we order another little batch and there is a big fight about it. The Treasury has to understand the need for the drumbeat—have we managed to get the message through?

The Treasury understands the need for that drumbeat. My noble friend is absolutely right that you cannot turn defence industry production on and off like a tap, and that we have to maintain the capability to produce ships or whatever military equipment that we need. It is also particularly important that we maintain the skilled labour and not allow those skills to be lost. My noble friend will know that the numbers of ships are now set out over the next few years, with designs for frigates and destroyers being planned for what comes next. I also draw noble Lords’ attention to the up to 12 additional AUKUS submarines. So the Treasury understands both the need for more money—which has been injected—and the need to ensure that we get that steady drumbeat, as my noble friend says.

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My Lords, it is the turn of the Conservative Benches. We have four Conservatives up. Can they quickly decide which one of them wants to ask the question?

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Oh!

As the Minister must know, there are a number of former RAF stations that, until the defence review, were not required; I mention particularly the example of RAF Scampton. Will the Minister now have another review of those airfields to see which are appropriate to meet the new defence requirements? As a former pilot, I would have thought that there were two or three that would fill that category.

The defence review will require us to look at what bases we have in order to deliver the defence review, whether they are RAF or other facilities. Of course, we need to do this in a sensible way and one which delivers value for money. The number of bases and where they are is important, whether they are RAF or other bases.