5. (a) We welcome the clarification of defence
shipbuilding policy which the letter from Lord Bach to the Chairman
of the Committee introduces. This was reaffirmed by the Minister
during oral evidence. It is clear that until we started our inquiry
some fabrication of warships, although limited in scope, had been
diverted overseas. The Government has acted with alacrity to close,
or at least diminish, the relevant loophole, which should not
have been open in the first place. For reasons of security and
protection of the capability, the fabrication and assembly of
military vessels commissioned by the Ministry of Defence must
remain within the UK. The letter from Lord Bach explained that
instances such as the one drawn to our attention, were caused
by the receipt of more cost effective bids, or a shortage of relevant
skills or equipment. There must be no exceptions to the stated
Government policy on warship construction. All appropriate efforts
should be made to ensure that the skill and equipment base sufficient
to allow this policy to be fulfilled is available. [Paragraph
12]
(b) We consider that, given the Government's
policy on home grown warships and accepting the somewhat limited
scope for competition that this policy allows, it is the duty
of the Ministry of Defence to provide the earliest notice possible
of its commissioning decisions. [Paragraph 13]
(c) In the light of subsequent developments
concerning MoD commissioning plans, most of which might have been
anticipated, at least to some extent, we deprecate the way BAE
SYSTEMS went about reducing the number of workers at its yards
on Clydeside. The company's heavy-handed exaggeration of the numbers
who would be required to go must have created a climate of uncertainty
and low morale, which has only improved following the more optimistic
forecasts of recent months. We recognise that BAE SYSTEMS operates
in a hard business world and in a politically sensitive industry,
but we recommend that in future the company adopts a more sensitive
and straightforward approach to its workforce. [Paragraph 16]
(d) We feel that the overall concept of
the BAE Ten Year Strategy lacks an appropriate level of flexibility
common in other business plans. We hope that BAE SYSTEMS will
review its approach on a regular basis. At the very least the
Strategy should constantly focus on prospects over a 10-year period
and not be subject to a diminishing timescale. [Paragraph 24]
(e) We believe it is essential that, in
order to maintain the quality, sophistication and expertise of
warship design, which is a feature of the UK shipbuilding industry,
the current Government policy on the commissioning of defence
vessels should be extended to include the design role. [Paragraph
27]
(f) BAE SYSTEMS bemoaned the lack of investment
in research and development from which the industry suffered.
Sufficient funds were apparently unavailable to support an appropriate
level of research. This must change if the industry is to thrive
beyond the next ten years. Ministers made it very clear that although
some grants were available, there was no extra money in the Government's
pot further to subsidise research and development in shipbuilding.
We therefore urge the industry to consider very carefully the
implications for future success, profits and jobs of allowing
the research and development expertise which is available within
the UK shipbuilding industry to stagnate or go to waste through
lack of adequate investment. [Paragraph 30]
(g) Shipbuilding was, in living memory,
the heavy manufacturing heart of Western Scotland. Despite having
undergone radical surgery, the organ continues to function, but
cannot be left without proper care. The Task Force designated
a clear role for the Scotland Office in promoting export orders.
The job requires regular liaison with the owners of the Govan
and Scotstoun yards. Failure over a period of months to observe
this obligation would amount to a serious neglect of duty. [Paragraph
36]
(h) It is very much in the interests of
the UK shipbuilding industry to strive to develop a system of
mutual support and co-operation which would enable the dissemination
of best practice and stimulate growth. The introduction of an
individual overseer or "Czar" would be no panacea to
the problems faced by the industry today. We do not consider that
in the context of the shipbuilding environment one person could
be expected to be able constructively to manage the dynamics surrounding
competition, commercial sensitivity and Government procurement
activity to the satisfaction of all those involved. The Shipbuilding
and Marine Industries Forum allows the separate parts of the industry
their own voice. It could well be that to display itself with
maximum efficiency and force, the Forum needs to undergo further
re-organisation. But it is the appropriate body to deal with the
issues which otherwise might be directed towards a co-ordinator.
[Paragraph 47]
