Examination of Witnesses (Questions 440-459)
BARONESS TAYLOR OF BOLTON, DR ANDREW TYLER AND MR AMYAS MORSE
29 APRIL 2008
Q440 David Mundell: Yes.
Baroness Taylor of Bolton: I do not think that is possible. We have reiterated the dates on the carriers as 2014 and 2016 quite recently. So far as the tankers are concerned my understanding is that as there is now no design ready for the tankers if there were to be a delay in the carriers, as you were speculating, it would not actually dovetail in time-wise with any capacity that would be there. The actual design is not ready enough to just slip into place in that kind of way. If all goes to the original plan then we will be strapped for capacity in the UK in terms of delivering those fleet tankers and that is another reason why we had to make sure that we were looking as openly as possible at what the options were.
Q441 David Mundell: Going back to the previous question, if it was felt to be advantageous to reclassify the vessels, is that legally possible?
Baroness Taylor of Bolton: I think once you have put something out to tender—and I am not sure about the legalities—I would say that if you did go down that route it would cause greater delay, and that would be greater delay to the design, greater delay to the production, which would not necessarily have made life easier for those trying to balance capacity on shore; and it would also mean a delay to getting those vessels in service, and that is not something that we would welcome, given our overall commitments to meet our environmental obligations, as well as providing a better service to the Armed Forces.
Q442 David Mundell: It would be useful to know, in perhaps a letter to the Committee, whether it is legally possible.
Baroness Taylor of Bolton: I think once you have actually advertised that contract it would be quite difficult to redefine it—I think it would be very difficult to redefine it.
Q443 Chairman: Our worry is that if signing on aircraft carriers is delayed and MARS' orders go somewhere else in Europe because local industry cannot compete because of hidden subsidies in Europe, then obviously you will understand there will be a lot of uproar and anger among the industry and among the unions.
Baroness Taylor of Bolton: I do understand that and when I was in Glasgow with Ian that was one of the things that was raised with me by some of the people who were there. But we do have this issue that we do not have a design that we can just slip in for these fleet tankers, so it is not as simple as it might superficially appear.
Q444 Mr Davidson: If I can pick up one point that you said at the very beginning, that it would take longer if the ships were not classified as commercial. I do not quite understand why that is. My understanding was that you could decide to make them commercial or you could decide to make them not commercial, but it would take longer if they were not commercial because presumably you would have to get justification for this. We have not heard this before.
Baroness Taylor of Bolton: You actually have to make an application through derogation for a particular vessel to be classified as military and therefore you have that procedure to go through before you can actually get to the start point.
Q445 Mr Davidson: That is derogation from whom?
Baroness Taylor of Bolton: The EU.
Dr Tyler: You have to apply for an exemption to Article 296 and because the EU is very focused on Article 296—indeed, in December 2006 they strengthened the rules, so to speak, around Article 296 to avoid too many exemptions occurring—it was our judgment that there would be quite a considerable amount of administration and application required in order to build the case for an exemption against Article 296, given the intrinsic nature of the equipment.
Baroness Taylor of Bolton: Because these are fleet tankers first.
Q446 Mr Davidson: Nobody has ever told us that before. Nobody from the MoD has ever said that it was required to be approved by Brussels if we were to make them non commercial. The suggestion has always been that this was a decision you had taken that could be clawed back if the MoD chose to do so, which is why some of my colleagues have been pursuing the question of whether or not they could be slotted in if the aircraft carriers were delayed, the implication being that this is a choice for the British Government; that we can decide whether to slot them in at the beginning. I now understand, following discussions elsewhere, that that cannot be done because of the issue of design. But nobody has ever said that we would have to get permission from the EU in order to have these classified as non commercial ships. Is this a change in policy or is it a new openness?
Baroness Taylor of Bolton: No, it is neither. I have heard the discussion on 296 and actually I think when the trade unions came to see me on this particular issue they did ask about Article 296 and whether we would classify it in that way. So I do think that there has been some reference to this issue, although maybe other issues have come to the forefront and therefore it has not been noticed in the same way.
Q447 Mr Davidson: There were two guarantees that your predecessor was giving to the unions in relation to the MARS ships, the tankers, that first of all you would look at the question at the beginning, but that has been overtaken by events, which the carriers moved forward and so on. The second was that if there were for any reasons gaps in the orders, gaps in the work flow, then the MARS ships, the tankers, would, if necessary, be reallocated in order to fill in these gaps to provide a stable workforce. Are you now saying to us that that is not in fact possible? That now we have gone down this road of advertising in the European Journal that it would not be possible in the national interests to claw them back and use them to keep the workforce in a critical mass in the yard in order to keep it for, say, the carrier or the next bump in the ordering schedule?
Baroness Taylor of Bolton: I think that when we get to the stage of building these tankers—as I said they are not designed yet—the shipyards in the UK will be busy with other work; we will not have the capacity at that particular time.
Q448 Mr Davidson: I understand that that is the plan and that has always been the plan—I do understand that. But it has always been agreed and spelt out to the workforce on a number of occasions—and indeed the management of the yards—that should for any reason that not happen, should there be unexpected delays and there was a gap in the work flow, that the tankers would be available to slot into that gap in order to maintain continuity of employment. Is that now not possible?
Baroness Taylor of Bolton: It would have to be a very long delay in terms of carriers for this work to be the replacement because this work is not available for a couple of years and we are not considering that.
Q449 Chairman: We were told by the workforce and by the industry that if an order is not signed quickly then there is going to be a gap by the end of this year. This is the understanding I had through my meetings with the MoD representatives and with the unions, that if there is any delay in aircraft carriers then something could be filled in by bringing MARS in to this to fill the gap. This is something which worries us now even more.
Baroness Taylor of Bolton: If you are talking about the end of this year there is no way that at the end of this year we would be ready to do that kind of work on MARS because it is not even designed yet, and the contract has not been met yet. So we are not that far forward with that particular programme.
Q450 Mr MacNeil: What we are hearing is obviously very concerning and I am wondering what Article 296 might mean in the worse case scenario for the Scottish yards rather than the normal case scenario because it seems to me that the field is going to be more open in fact.
Baroness Taylor of Bolton: No, it does not make any difference at all. It has been there for some time and it is whether you designate a ship as a battleship or not. Fleet tankers have not been designated as fleet battleships because that is not their primary purpose—they are fleet tankers. We did not want to go through that procedure because it would have led to some delay and we were certain that it was the right classification anyway and we wanted to move quickly because we want these to be built as soon as possible; but they are not yet designed and ready for construction, so in one sense whether the carrier is signed tomorrow, next week, next month or whenever the MARS project is not at a stage of readiness to slip into contracts at the moment.
Q451 Mr MacNeil: But it is still very concerning for Scotland and the Scottish yards given the category of the MARS project.
Baroness Taylor of Bolton: No, this is only the first part of the MARS project that is categorised in this way, the fleet tankers. The other ships that we will want, the logistic support vessels and so on, they will be classified—
Q452 Mr MacNeil: So you are saying that they will go to UK yards, these MARS projects?
Baroness Taylor of Bolton: We have guaranteed some work; the appropriate kind of work will be done in the UK.
Q453 Mr MacNeil: How much is some?
Baroness Taylor of Bolton: We are quite a long way away from making decisions about these vessels and they are still in the planning stages—they are not this year or next year—and the details of how much work we will be guaranteeing is part of the total that we have still to reach in terms of a business agreement that we will reach with the Joint Venture, and when we are talking about their long term work programme that is one of the issues that we will be discussing.
Q454 Mr MacNeil: Some could be 1% or some could be 99%; which is closer?
Dr Tyler: In terms of the three classes of vessels within the MARS programme, and indeed the reason why we set the MARS programme into essentially three different projects, was to enable us to be on the one hand satisfied of our urgent operational need for the fleet tankers, which we need on environmental grounds in order to have a double-hulled tankers available for the Navy, but there are two other classes of ships and these are both expressed in the Heads of Terms for the Terms of Business Agreement that would cover the Glasgow yards. One class of ship is called the Solid Support Ship and the other class of ship—we call them the JSBL—the Joint Sea Based Logistic ships, and the Joint Sea Based Logistic ships are considerably more complex than the tankers and indeed the Solid Support Ships, to the extent whereby we have put those inside the boundaries of the scope that will go exclusively to the UK yards. The Solid Support Ships, in our judgment, are a simpler ship—they are more complicated than tankers but they are a simpler ship—and I think there is a judgment to be made at the time when we come to do the detailed planning of the Solid Support Ship project about how we treat those. I think the question that will come at that particular point in time is far more down to the work flow through the yards and whether or not those particular vessels are required intrinsically to sustain our key industrial capabilities.
Q455 Mr MacNeil: So what value do you think is going to go to the UK, or to Scotland?
Baroness Taylor of Bolton: At the second part of the programme a high proportion will, but you cannot expect the MoD X years before a given stage of a contract, to be making estimates like that.
Q456 Mr MacNeil: You cannot give any guarantees you mean?
Baroness Taylor of Bolton: What do you mean by guarantees? Do you mean that we decide today what we are going to do—
Q457 Mr MacNeil: The guarantee that we can expect it in Scotland.
Baroness Taylor of Bolton: The guarantee is that the Joint Venture, to which we are very committed, is at the stage of discussion in terms of business agreements, which goes into a great deal of detail, much of which is commercially sensitive and cannot be discussed openly, and all of these things have to be discussed in a great deal of detail as we progress through these negotiations.
Q458 Mr Wallace: Can you tell me how many logistical support ships that European Member States with naval yards have in their current or previous programmes derogated from 296 to build those ships? How many have decided that those logistical support ships should be exempt from 296?
Baroness Taylor of Bolton: I will leave it to my colleagues to make estimates but I would doubt that there are many countries that have as many ships or are building as many ships as we are. As I said, our shipbuilding programme is £14 billion. Do you know anything about it, Andrew, because I certainly do not?
Dr Tyler: I do not have the facts at my fingertips but I would be surprised if ships of that nature have been ordered since the tightening of the Article 296 rules in December 2006.
Q459 Mr Wallace: The reason I am curious is that Article 296 actually has an existing permanent derogation for, I suppose, articles involved in defence outside the European original Union that was set up, and indeed in most cases it is for the European courts to decide when a case is presented by the European Commission whether the Member State is in breach of its derogation rather than in fact for a pre approval by the Commission in full. In fact the European Union has taken better steps to try and tighten it by the new draft directive, to which the MoD has objected—it went through the House last month. What I am curious about is that it seems to suit us to use the derogation part of this 296 as a way of saying, "We cannot have the MARS in Scottish yards or any yards in the UK," when in fact actually there is no evidence to suggest that the European Commission would block us building those tankers under defence needs.
Baroness Taylor of Bolton: Can I just say that with respect I think you are holding the wrong end of the stick here? We are not using 296 as a reason for not building them here. If everything goes to plan we will not have the capacity to build them in the UK. So the option of doing it that way would have meant significant delay to one project or another, and we would then have to decide which do we concentrate on? Because we had tried to get away from the situation of having peaks and troughs and trying to get some evenness overall in production terms, we could not afford to wait what could have been several years to get these fleet tankers—we need them urgently—and therefore we had to look at what was the best situation and the best strategy for us to adopt to get these particular things. Answering a technical question about what would have happened had we gone down that route, that could have led to further delay, but the basic fact is that looking across the spectrum at the capacity of the yards in the UK and looking at the need for these extra vessels we did not have the capacity.
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