Ministry of Defence Procurement: UK-manufactured Products
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Lord Beamish
To ask His Majesty’s Government what steps the Ministry of Defence is taking to maximise UK- manufactured products in its procurement decisions.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
My Lords, the defence industrial strategy set a vision to make the UK defence sector more competitive, innovative and resilient, including measures backing UK businesses, lowering barriers to entry and increasing competitiveness by supporting SMEs through the defence office for small business growth, reforms to social value and exploring an offset policy, regional defence growth deals supported by £250 million and establishing the office of defence exports, helping businesses compete globally.
Lord Beamish (Lab)
I thank my noble friend for that Answer. Under the national shipbuilding policy, the Ministry of Defence is committed to placing UK shipbuilding orders in UK yards to ensure a continual drum beat of work. Therefore, why, under the defence maritime services next generation contract, which has just been awarded to Serco, will 24 tugs and pilot boats be built by Damen in the Netherlands? Why are we exporting UK defence jobs to Holland and to a company that has recently been bailed out by the Dutch Government? I ask my noble friend to follow the German Government’s recent announcement that they will cancel their frigate order with Damen and to place those much-needed orders in UK yards.
Lord Coaker (Lab)
I will look at the specific example that my noble friend has raised about the awarding of that contract. As well as that example, I could give others of where we have been successful in ensuring that shipbuilding is seeing something of a renaissance in our country, not least the recent winning of the contract from Norway for Type 26 frigates on the Clyde. That was an enormous boost to British shipbuilding and to that part of Scotland. That is the sort of example that we want to build on, but I will look at the example that my noble friend raised.
Lord Robathan (Con)
My Lords, those who know about defence procurement—as the Minister does; I am encouraged by much of what he says—know that it is incredibly bureaucratic. That slows down any decisions —I do not know whether it has affected this decision—for UK-made kit rather than buying stuff off the shelf. Can the Minister please look carefully at how we can get rid of some of the bureaucracy surrounding defence procurement?
Lord Coaker (Lab)
We have recently recruited a new National Armaments Director and reforms are taking place in the Ministry of Defence. I ask this of the noble Lord and the House: why is it that in wartime we have an urgent operational requirement that cuts through bureaucracy and red tape, allowing us to deliver the weapons and equipment that our Armed Forces need? We need to ensure that that sort of attitude and culture operate in peacetime. It should not take a crisis or war to deliver the things we want and the equipment our troops need.
Lord Cromwell (CB)
My Lords, the real barrier for UK SME manufacturers is the time it takes to secure contracts, which is typically years, even for kit upgrades. By contrast, as the Minister knows, I recently hosted an event exploring ways to link UK manufacturers with Ukrainian software developers, who are innovating and making daily updated wearable drone detection kit. That is saving soldiers’ lives in Ukraine every day, but our troops do not have it. Can the Minister tell the House how the defence industrial strategy will engage with SMEs, for example in supplier networks such as the neutral vendor framework for innovation? Could this include cross-border joint ventures with innovative front-line experience elsewhere, of the sort I have just referred to?
Lord Coaker (Lab)
We have established and are looking to grow a defence office for small business, which will be important. The noble Lord’s point is an extremely good one. The idea that the solution is always massive business has been shown by Ukraine not to be the case. The development of small business and small industry—the noble Lord gave the example of drone manufacture on a small-time basis—has been essential to the Ukrainian effort against the illegal Russian threat. His point about how we can develop that sort of capability and capacity is important for us all and something we need to learn from. As I said, the office for small business growth will take that forward.
Baroness Humphreys (LD)
I declare an interest in that one of my sons works in defence procurement. In light of concerns raised about the reliance on overseas supply chains, can the Minister set out what steps the Government are taking to ensure that procurement decisions actively support UK-based manufacturers so that our defence capability is not dependent on foreign production?
Lord Coaker (Lab)
We are doing everything we can to support UK manufacturing. Let me set out one of the reasons why we are doing that. As I have said many times, Ukraine has been a wake-up call for us. The manufacturing industry in this country has been allowed to decline over decades, in a way that puts our homeland defence at risk. It is in our own national interest to grow our defence industries, which is why it will be at the heart of what we do. It is not only about what we do here. The noble Baroness will have seen that the carrier strike group was out in the Indo-Pacific and is now back in the Mediterranean. There have been numerous round tables, conferences and industry events on the carrier, and on the ships with it, to promote growth. One of the ways to do that is by expanding our growth to the rest of the world.
Baroness Goldie (Con)
My Lords, I revert to the Question asked by the noble Lord, Lord Beamish. When it comes to MoD procurement within the United Kingdom, there are two certainties: there is a £2.6 billion black hole in the defence budget and domestic procurement has virtually dried up. In addition to that, the defence investment plan appears to have evaporated. Can the Minister tell this House what is happening to put this country on to the Government’s much-vaunted phrase, “war readiness”?
Lord Coaker (Lab)
On the specific question of the defence investment plan, that will be published this year, so the noble Baroness and the House will not have to wait too long. It will lay out the investment decisions we are going to make. On the basis of a growing defence budget, that defence investment plan will lay out the sorts of capabilities we need and the decisions that will need to be made to ensure that we have war readiness. We need to learn from what has happened in Ukraine and look at the wars of the future. The defence investment plan will look to fight that war to ensure that we are war ready.
Lord Cryer (Lab)
My Lords, in the two or three years after the end of the Cold War, around 150,000 jobs were lost in defence manufacturing. Everyone is right in hindsight, but now, looking back, that looks extremely short-sighted. Is there not now a need to reverse that process and expand our manufacturing base, at least as far as weapons manufacture is concerned, in this insecure world?
Lord Coaker (Lab)
My noble friend makes a really good point, and of course he is right to say that. The total number of direct and indirect jobs supported through MoD expenditure with UK industry a couple of years ago was 272,000, which was up from 244,000 the year before—so defence is growing. Is it growing fast enough? We would all like to see it growing more quickly. But there is no doubt that the development of a UK defence industry is crucial to our defence and the defence of our allies.
Lord Rogan (UUP)
Noble Lords will recall the Prime Minister’s announcement earlier this year of £1.6 billion in contracts for Thales in Belfast to supply air defence missiles for Ukraine, creating 200 jobs in Northern Ireland. The deal also included the prospect of a further £500 million of additional work to be added in collaboration with the Ukrainian industry partner. Can the Minister provide the House with an update on progress, including how many new jobs have been delivered and whether the extra £200 million of work for Thales in Northern Ireland has been secured?
Lord Coaker (Lab)
One of the key points that the Government have pursued is to ensure that the increase in defence expenditure is felt across the nations and regions. Northern Ireland has secured significant sums of money: Thales, as the noble Lord mentioned, as well as other manufacturers, including small and medium-sized businesses. It is a massive success story for Northern Ireland. Northern Ireland plays a huge role in the defence and security of our nation. There are huge numbers of jobs being created there, and there is a huge amount of investment taking place as well.
Lord Trefgarne (Con)
My Lords, as Defence Procurement Minister back in the 1990s, I recall receiving almost daily communications from No. 10 Downing Street. Does the present Prime Minister play any part?
Lord Coaker (Lab)
Let me answer a couple of questions, and I hope it addresses the noble Lord’s point. The Prime Minister is very supportive of the defence industry and the development of this country and has supported that a great deal. He allows the defence industry and the MoD to carry on with their work. The important point is that he is very supportive of that, as noble Lords can see by the increase in the defence budget and the interest he takes in both defence and foreign affairs.