Defence and Security Public Contracts (Amendment) (EU Exit) Regulations 2020

Viscount Trenchard Excerpts

Tuesday 3rd November 2020 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I thank the Minister for introducing this debate on these regulations. I congratulate the noble Lord, Lord Dodds of Duncairn, on his excellent and interesting maiden speech. I look forward to hearing often from him on this and many other matters.

My noble friend explained the technical effect of these measures, and I welcome the increased confidence they bring that there will be no cliff edge as far as military procurement is concerned after the implementation period ends at the end of the year. It is welcome that the proposals will make it possible for the nation to decide its priorities for procurement partnerships in defence, removing the distinction of treatment between EU suppliers and other potential partners outside the EU. This will allow new partnerships to be formed. It was good to see the recent agreement with Australia in respect of its future frigate programme, and it should enable other potential partners, such as Japan, to be considered for future defence projects.

The fiscal challenges resulting from the Covid pandemic make it all the more important that we build new partnerships to share the escalating cost burden that each new generation of military equipment requires. In forming new procurement partnerships, we will be able to invest in the capabilities that the country really needs while taking advantage of the strengths that new partners can bring.

These regulations permit the Government to abandon the requirement to offer all defence procurement projects, and indeed other procurement projects, equally throughout the EU, unless there are good reasons for exemption on national security grounds. It is right that this exemption will still apply going forward, and it is highly desirable that the UK should possess competitive, world-class shipbuilding and aircraft manufacturing industries.

However regrettable it may be, at present, UK employment costs and productivity do not compete with global norms. It is important that political objectives to maximise UK involvement should be balanced against the overriding need to procure the best equipment at the best price and on time.

On 7 October, I asked the Minister if she could confirm that in the new fleet solid support ships programme, the priority would be best value for the UK defence budget. She confirmed that she was assessing the interest of those parties that had responded to the information notice process, but I do not think she made it clear that best value is the most important factor on which the contract would be awarded.

There is growing alignment between the aspirations of Japan and the UK interests in defence equipment. We know Japan also wants to build two or three similar support ships in the same timescale. At the same time, there are indications that Japan is increasingly looking at the UK as a potential partner in its future fighter programme. Does the Minister agree that the prospects for creating sustainable, competitive defence equipment industries in the long term would be enhanced by working together with partners such as Japan, not by applying too-prescriptive domestic content criteria or a requirement that there be a sole prime contractor, which must be a British company? Would not a partnership of British and foreign companies often provide the best way forward for such contracts, which become ever more expensive?

I look forward to other contributions and the Minister’s reply.