Major Defence Contracts

Question

15:01:00

Asked by

To ask His Majesty’s Government what assessment they have made of the economic impact of uncertainty surrounding major defence contracts.

My Lords, I beg leave to ask the Question in my name on the Order Paper and declare my interest as a serving Army Reserve officer.

My Lords, the Ministry of Defence recognises the importance of certainty in the MoD’s demand signal for industry. Making the right procurement decisions is a key enabler for improving effective equipment delivery to the Armed Forces and ensuring greater value for money for the taxpayer. This Government are determined to establish long-term partnerships between business and government, promoting innovation and improved resilience.

I thank the Minister for his response. Poland is now spending 4% of GDP on defence. Finland has a wartime strength of 280,000 and can call on a reserve of 870,000 troops. NATO allies are waking up to the fact that we must take defence spending seriously. Will the Minister do everything in his power to ensure that the Treasury understands why we must spend not 2.5% but 3.5% as a minimum on defence and make that change before the spending review?

I thank the noble Lord for his Question and, as I always do, acknowledge his service to our country as a reservist. On defence spending, he will know the Government’s policy. In the spring the Government will set out a pathway to 2.5%. He will also be pleased to know that the Government have not waited for that; we have already increased defence spending by £3 billion in the next financial year. We are on a pathway to increased spending on defence.

My Lords, when the defence review finally appears, it is hard to imagine that it will not include a requirement for an innovative, agile and scalable defence industry. What impact does the Minister think that the continued uncertainty over funding, alongside the treatment being meted out to the defence industry at some of our academic institutions, will have on the long-term investor confidence so necessary to the future health of this crucial sector?

I say to the noble and gallant Lord that of course the defence industry will be an important partner for His Majesty’s Government. He will know that we are currently consulting on a new defence industrial strategy. That consultation finishes at the end of February and we will come forward with various proposals to deal with the defence industry and promote it in the future. This gives me a chance to take the point he made, which I think most noble Lords will take. He made the point about the inability of the RAF to go to certain university campuses to recruit and the inability of certain defence industries to go to certain university campuses to promote, quite legitimately, their sales and defence jobs. That is an absolute disgrace. I hope the universities take that on board and do something about it.

My Lords, does my noble friend the Minister not agree that the experience of the war in Ukraine has made it all the more important that we have an updated defence industrial strategy, and can he indicate when that will be brought forward to the House?

As many noble Lords have heard me say, the war in Ukraine has been a wake-up call not only for this country but for the alliances across the world. We need to be able to scale up our industry and do so quickly, and to reflect on the sovereign capability we need, so that we have that as well. It will require apprenticeships and investment in all areas of the country. My noble friend also makes the point that we have to know what we wish to spend our money on. Whatever billions we end up spending, it will be important to spend money on the sorts of defence equipment and capabilities we need to meet the threats of the future, not those of the past.

My Lords, the SDR suggests that the defence sector is important for growth, yet a couple of weeks ago the House magazine pointed out that many SMEs in the defence sector are struggling, and some are thinking of moving out of defence. What assessment have His Majesty’s Government made of this and what are they doing to support SMEs in the defence sector, which is so vital?

We are supporting the SME sector by spending billions of pounds on defence. The noble Baroness makes an important point about the importance of small and medium-sized industries. We often talk about the primes—the really big companies— but they are often supported by small and medium-sized businesses, which are extremely important, along with ensuring we get investment across the country. I will tell noble Lords the other thing that needs to be done. For decades in this country we have had a shortage of skilled workers and skilled apprenticeships, and certainly small and medium-sized businesses need help to recruit the skilled labour they need to deliver the products that they have on offer. The final point I will make is that, clearly, we are now in a period of transition from pre Ukraine to post Ukraine. That obviously results in looking at who we are buying from and the sorts of things we are purchasing, and the defence review will deal with some of that as well.

My Lords, further to the point raised by the noble and gallant Lord, Lord Stirrup, it is the case that our defence industry sector has never been in greater need of the skills and talents of our brightest students, and the Minister failed to address the point specifically raised by the noble and gallant Lord. This House wants to know what are the Government doing to address the unacceptable intolerance whereby companies are hounded off campuses and barred entry to careers fairs? In particular, what are the Government doing to ensure that this obstruction to the supply of talent to the defence industry sector is removed?

I am sorry if I did not answer the point raised by the noble and gallant Lord. The point the noble Baroness makes is extremely important, and she asks what the Government have done about it. The Secretary of State for Defence, and I think the Business Secretary, wrote to the universities concerned and asked them to ensure that obstructive factions within the student unions in their universities did not prevent the legitimate recruitment, with respect to the RAF, and the legitimate activities of defence companies as well to try to recruit. It is extremely important for all universities to understand that of course we accept the right of students to protest, and all the rights and freedoms that come under a democracy—that is what we are standing for in many of the conflicts in which we are involved across the world. But with that comes the universities’ responsibility to do what they can to ensure that people pursuing legitimate activities—which will help the defence and security of our nation and our allies—are protected, and this Government will do all they can to ensure that they are.

My Lords, on Thursday evening, I spoke at the Cambridge Union on behalf of a motion that Britain should spend more on defence and needs more defence—and I am glad to say we won, much to my surprise. One young man came up to and said, “Do the Treasury actually understand how dangerous the world is and how important it is we should spend money on defence?” Does my noble friend the Minister agree that the Treasury does understand—or does it not understand?

I will give a very quick answer. I can tell my noble friend that the Treasury of course understands, and that is why the Government have agreed to spend more money on defence: £3 billion more next year and a pathway to 2.5 % to be announced in the spring. That is a Treasury and a Government who recognise we need to spend more on defence, and we will do.

I welcome many of the remarks the Minister has made this afternoon, but is there not a big problem with the way we are conducting these discussions? All the time it looks as if we are discussing percentages between the Treasury and the Ministry of Defence, when in fact the strategic health of the world has changed for the worse. We need to involve the public more, to get them to understand why we need to spend more on defence. The Minister has made some very forthright remarks this afternoon, many of which I welcome, but do we not need to broaden out this argument and make it not just among ourselves but out there in the public field?

Again, the noble Lord makes a really important point and I agree: it is something that I have said from this Dispatch Box. The debate about the peace and security of our world, the defence of the freedom and democracy of our country, is something that is important and that we need to talk to the British public about. I think the British public are becoming increasingly concerned about peace and security and the threats to our country; that is why the defence review will look at homeland security, threats to undersea cables and all of those sorts of things. But let me say this: I say quite clearly from this Dispatch Box that the geopolitics of the globe is changing in a way that many of us perhaps did not expect. I think the British public understand that and certainly we in Parliament, across this House, understand it. We will have to address these points in a way we have not before. Of course, people want money spent on schools and hospitals, and all those things, and that will have to take precedence as well, but alongside that there can be nothing more important than the defence and security of the values we and our allies across the globe stand for.

My Lords, it is nowadays accepted that social media is a weapon of war these days. It was recently suggested to me by a senior military figure that we should spend as much on social media as we do on our hard kit. Does the Minister agree?

Shall I be honest? I do not know how much we should actually spend and whether it should be the same on social media as on hard power—tanks or fighter jets—but I do know, and I support the point the noble Lord is making, that every Member of this House understands and believes that the nature of warfare is changing. We have hybrid warfare now and threats that we did not expect: social media; attacks on our critical national infrastructure; and attacks on underwater cables. Clearly, we will have to spend more money, as a nation, on all those aspects of defence and security, and to prioritise within the existing defence budget. It is a changed defence environment and certainly social media is part of that. I say this: if we lose the fake news war, if you like, the social media war, we will be half way to losing some of the other battles that we will fight. That is why it is so important.