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Mr. Ian Davidson (Glasgow, Pollok) (Lab/Co-op): I shall begin with a quotation:
"The problem with building big carriers is that we haven't done it for 50 years and we want to do it here. If we really wanted big carriers they have a production line for them in Norfolk, Virginia. We could be buying American, rather than giving work to the shipyards in Britain."
That was said on "Sky News" on 28 July by Lord Garden, the Liberal Democrat spokesman on these matters in the House of Lords. I am glad that there is a clear division between the Liberal Democrat party and the Government as to where the carriers should be built. Among Labour Members, there is no doubt or equivocation that these carriers should be built in Britain.
The carriers form part of the biggest ordering pattern for some time. I very much welcome that, and the partnership developing between industry and Government in respect of ordering. It is important that we work towards avoiding boom and bust in the shipbuilding industry. I want to raise several matters with the Minister this evening. If he cannot answer them tonight, I hope that he will respond to me at a later stage, in my capacity as chairman of the parliamentary shipbuilding group.
How far has the MOD's maritime coherence study progressed? If it is complete, will it be made available to hon. Members? Also helpful would be an update on the discussions that have taken place between the MOD and the industry about bringing the industry together. What patterns and structures have been discussed? One of those hon. Members who represent Devon constituencies raised these matters earlier, but details of the MOD's view would be useful.
I have touched already on warship procurement in this country. It would be immensely helpful if we could have a clear and unequivocal statement from the Government that the MARS ships will be built in this country as well. Will the entire construction of those vessels take place in this country? Will the Minister assure the House that the MOD—or some forces within it—will not seek to have the hulls built abroad as part of a cost-saving exercise?
Most of us who have been involved in the industry for some time recognise that the distinction between hull construction and outfitting is now artificial. Vessels are designed to be built in modules, segments and sections, and that is much more efficient and cost-effective. It means that the hull is completed, followed by the other steelwork and then the rest of the outfitting. I hope that that point will be taken into account.
Will the Minister give an indication of when work will begin on the second batch of Type 45 destroyers? As I asked earlier, what efforts are being made to ensure that the design work on the new carrier is moved forward? I am aware that the supply of design work on Clydeside is rapidly running out and that a gap between the available work force and the work required is likely to become apparent in December. To avoid redundancies, the MOD needs to give the okay for some of the second batch design work to begin now. If highly skilled people in ship design are allowed to leave the industry, it will be very difficult to reassemble that work force later on.
Finally, I very much welcome the fact that work on the first of the Type 45 destroyers—HMS Daring and HMS Dauntless—is well under way. If that pattern is to be maintained, surely it would be logical to name the third ship, or a subsequent one, HMS Davidson?
5.14 pm
John Mann (Bassetlaw) (Lab):
I shall be brief and refrain from discussing general manufacturing industry, except to make one point about the skills of welders and
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others at Swan Hunter. I propose that the House should consider inviting a welder from Swan Hunter to demonstrate the most creative way of welding the hon. Members for Gosport (Mr. Viggers) and for Henley (Mr. Johnson) together.
Our defence industrial policy recognises the vital importance of procurement to our industrial base in the UK and ensures that jobs, skills and exports are all fully considered in making procurement decisions. Does my hon. Friend the Minister agree or disagree with that statement? If he agrees with it, why has that policy not been applied to the clothing manufacturing sector? On what basis are decisions made on price rather than best value? On what basis do we not classify clothing as warlike? Are there any other EU countries that do not classify clothing as warlike? For example, do the French classify clothing as warlike—despite the fact that their army never appears to participate in many wars, unlike ours?
The large contracts that are being given out are, it could be suggested, ruinous to small and medium-sized enterprises. What cognisance has the MOD taken, in its procurement policy for clothing, of the Department of Trade and Industry policy on contracting with SMEs? What cognisance has been taken by the MOD of the ability of our domestic clothing manufacturing industry to compete in the future? How does our present policy sustain an environment that enhances competitiveness? That is one of the categories of defence industry policy. My hon. Friend the Minister may be unclear about the point that I am making, so I shall put it another way. Some British clothing companies will no longer produce clothing because they have lost contracts that they previously had. The new contracts are for five or 10 years, so how will British companies be able to tender for such work in the future? The industry will no longer exist. In other words, will the inadvertent result of present policy be that we will have to give all the work to overseas competitors?
The example of Cooneen has already been cited. I understand that that company is world famous for the manufacturing of wedding dresses and babywear. Has due diligence been exercised to ensure its capacity and capability to carry out a contract for the MOD? Is it the case that the company failed to register accounts in the last year, and if so, why? Was the red army factory No. 3533 in China part of the tender bid that the company put in or did it change its outsourcing, after it won the contract, from, say, Belgium to China? I presume that such issues as capacity and capability were considered in advance of the contract being awarded. We would not want to be in a situation in which actual fabric samples had not been provided. Were fabric samples provided from China or any other proposed outsourcing for that contract?
Finally, has there been any quantification of the loss of British jobs throughout the supply chain caused by such decision making? I ask that because the supply chain includes some of my constituents. Bassetlaw provides a disproportionately high number of new entrants to the armed forces. Next week, young people in my constituency will apply to join the armed forces, and I do not want the people who volunteer to join our armed services when there is conflict around the world to be equipped with second-rate, shoddy Chinese clothing, instead of British clothing, to do the job that they are paid to do.
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5.20 pm
Jim Sheridan (West Renfrewshire) (Lab): In the short time left to me, I want to concentrate on two main issues that are relevant to today's debate. I have worked almost all my working life in the defence industry, so I hope that I reflect it accurately.
The first issue is smart procurement, which the DPA has promoted and implemented as a way to improve defence procurement. That has involved a change to the procurement cycle, the idea being that the industry is involved at an earlier stage. That may be true, but the overriding desire to get value for money still dominates competitions. MOD staff continually talk about wanting offers from industry that provide 80 per cent. of the capability at 50 per cent. of the cost. Various permutations of percentages are used, depending on who is talking. It is a great principle, but we rarely see it happening, because the DPA evaluation teams are not empowered or organised to assess non-compliant proposals.
Currently, a proposal may arrive from industry that is around 12 inches thick and is broken up into lots of small packages that are distributed to many disparate MOD teams who score it against a set of requirements. At no time do those teams have access to sensitive price data. All they can do is mark each response paragraph as compliant or non-compliant. Each proposal is assessed for its compliance, and in effect only those proposals that are deemed to have cleared the bar are considered for price and other commercial issues. At the end of the day, each company feels compelled to submit a fully compliant and therefore intrinsically expensive bid, and it would take a very brave company indeed to aim under the bar.
The basic point is that the DPA and its customer, the MOD's equipment branch, are not equipped or organised to assess a non-compliant bid that may offer better value for money by proposing a reduced capability and price. If the MOD and the DPA truly want to implement smart procurement they need to change their way of assessing bids and increase the calibre of staff involved in the process.
My second point is about overseas competition, which many hon. Members have mentioned today. The MOD, in its pursuit of competition, encourages overseas companies to compete for work in the UK. All UK defence companies are used to competition—it is a way of life for many of them, and it can be a positive pressure on businesses to ensure that waste is eliminated, overheads are reduced and product development cycles are shortened. It keeps companies fit and lean in the defence industry. However, the marketplaces where we can compete openly in the world are not that big. In fact, we find that we compete with the same companies in the far east and middle east as on our home turf. Okay, all is fair in love and war, but we do not have the opportunity to compete in those competitors' home markets, and the biggest culprit is the USA.
American companies are growing strong on rich pickings at home, and that gives them an added advantage over this country overseas. The UK Government should either get the US and other European domestic markets opened up to fair competition, or they should impose the same domestic
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restrictions on the US and other countries to protect our defence industrial base. That is the sort of language used in the pubs and clubs in my neck of the woods by people who work in the defence industry.
As I said, I spent most of my working life in the defence industry. I was a worker at Barr and Stroud, which is now called Thales. I also worked in Yarrow shipyard on the Clyde, which is now operated by BAE Systems. I congratulate the people whom I worked beside on the education that I received during that period—I am not blaming them for it—for which I am eternally grateful. Without being too critical, I have to say that the Ministry of Defence is one of the most difficult organisations to deal with. Extreme frustration is caused by procrastination when placing orders. Companies have to wait for orders that keep getting pushed further back down the pipeline. Companies and management sometimes have difficulty retaining their work force while waiting for such orders to come through and holding on to spare parts and components required to fulfil a contract. The Ministry of Defence is not an organisation with which someone would choose to work.
Many jobs in the defence industry have been lost over the years. More jobs have been lost in it than in any other industry of which I am aware. I am proud of the fact that that was done by companies and trade unions getting together to recognise the problems and taking appropriate action. I pay tribute to them, because if they had not acted at the time, we would not have the defence industry that we do, especially on the Clyde.
If we are to have a strong, robust and efficient defence industry, we must give the management and the work force the tools to realise that. That is why we need a long-term strategy that allows employers to plan, where possible, some years ahead in placing contracts and getting the tools to do the job. We must also consider the suppliers to the major contractors, because they have a right to know about the strategy. More importantly, employees in the defence industry must know the direction in which the Government's strategy for defence is going and how that will impact on them.
I am proud of the Government's record on placing MOD contracts with British companies, and I hope that it continues. However, may I also send a message to British companies that depend wholly on defence contracts? The MOD requires only a finite amount of equipment and has only a finite amount of taxpayers' money to spend. Every company involved in the defence industry should develop tangible diversification plans so that when there is a downturn in the defence industry, they will be able to compete in the commercial market.
5.28 pm
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