Examination of Witnesses (Questions 500-517)
BARONESS TAYLOR OF BOLTON, DR ANDREW TYLER AND MR AMYAS MORSE
29 APRIL 2008
Q500 Mr Wallace: Just following my colleague's question about government-to-government, when the Carrier projects were in process there were discussions about the French coming alongside or making overtures to the UK, sharing capacity, et cetera. We have recently had the State Visit and I know it happens even in FRES that there is a flavour from the French there. With the super-carriers is that idea gone, that we are going ahead alone as such or are we going to wait for the French White Paper?
Baroness Taylor of Bolton: We are not waiting for anybody. We are not waiting for the French. The French have not reached a decision. We have gone through Main Gate, they have not, so there is a different set of circumstances. The French have been involved in the design. They paid, I think it was, £70 million to be part of that original design stage. If they do go ahead I think they pay another £35 million or £40 million, something of that order. That decision will be theirs. Should they go ahead then there may be some extra savings that we could make by having three rather than two, but the French decision is not influencing us. We decided to go ahead last July and we are sticking by that decision.
Q501 Mr Wallace: I understand that. If the French said, "We will go ahead", would you try and persuade them that as well as potential savings, potential opportunities for Scottish and British defence and aerospace companies to be part of the French package that they would join as an alliance member effectively or they would set up their own methods and we would just be helping with the design?
Dr Tyler: We looked at all the possibilities sometime ago because the opportunity for cooperation has been around for sometime now. What we agreed was that there was a huge commonality in the design and that is why we have shared a huge amount of the design. They bought into the design, so to speak, because we were ahead of them. There has been a very virtuous relationship between us in maturing the design and they have been good contributors to that as well as just financially. Primarily, when it comes to the actual constructive effort, they are taking a different approach to their constructive effort than we are, they have a fundamentally different way that they are going to put it together. That was always clear from quite an early stage in the proceedings. We did look at these options that we would perhaps take a part of the ship and we would have three blocks instead of two and some French yard would build a part of our carrier, but that did not pass the practicality test at any stage in the proceedings. The other area were we have got an advantage, and might take advantage, would be in equipments where we might be able to get some purchasing economies but, again, we have not factored that into our pricing. If there was a benefit to be gained that would be good, but we are not planning for that.
Mr Morse: It does not mean we will not take the opportunity should it arise, I assure you.
Q502 Ms Clark: Is the MoD satisfied with the work of the Scottish Executive and organisations such as Scottish Enterprise and the Skills Development Scotland organisation to ensure that the skills base in Scotland is sufficient to deliver MoD projects?
Baroness Taylor of Bolton: I think that the contacts that we have had as a Department about skills, and I mentioned how important I thought skills were for the future, have been mainly with the companies which have been encouraging, as I said earlier, apprenticeships in quite significant numbers. When I was in Govan and Scotstoun I was impressed by the way in which they have increased the number of apprenticeships, taken on a good number of graduates, and I was able to talk to them in both yards and thought that was really very important. Most of the contact that we have had about skills has been through the industry rather than through the Scottish Executive.
Q503 Ms Clark: Are you aware that the Society of British Aerospace Companies in Scotland has raised concerns about the skills gap? Is that something you have got major concerns about at this time?
Baroness Taylor of Bolton: I said right at the beginning that skills and maintaining skill levels is going to be a very significant challenge in many areas. You have only got to look at the nuclear challenge to realise that in the next few years we are going to be upgrading the deterrent but there is also greater interest in nuclear energy in Britain and, therefore, we are going to be competing for the same skills and will have to concentrate a great deal of effort in making sure that we encourage people to go into the right kinds of areas. There is quite a spectrum of skills that we will need from very high level graduates to young apprentices and that is something that does concern us and we intend to take further with industry because it is something that has a great deal of relevance to our ability to do what we want to do over the next few years.
Q504 Mr Davidson: Can I just pick that point up about things you want to do with industry. Can I explore with you further how the MoD can get involved in that. The memo that we had from the Society of British Aerospace Companies Scotland does actually say things like: "Many school leavers and students do not meet the sector's requirements or expectations. There is too low a number of UK science and engineering graduates who are able and willing to work in Scottish industry. There are too few qualified teachers in science subjects. There is a shortage of appropriate and key skills which is harming productivity. Training and skill development funding lacks clarity and cohesion" and so on and so forth, "Links with the education sector are under-developed". That is a pretty damning indictment of the policy of the Scottish Government at the moment. Rather than just leaving it to them to sink or swim, are there constructive ways in which the MoD as the customer can be more involved in some of these areas?
Baroness Taylor of Bolton: Yes is the answer. It is strange that you should alight on that because that is one of the issues that I have been talking to colleagues about most recently. Whilst I think over the last ten years or so, and probably longer, we have made significant progress in putting education at the centre of people's attention, there is still a long way to go in certain areas. I think that industry can have quite a large role to play in this in making certain types of work seem attractive and rewarding. I think that MoD and industry together can perhaps open some people's eyes, in particular on the science side, to some of the excitement that exists in engineering, to some of the potential that is there. A lot of the defence industry does offer very exciting jobs, at the cutting edge of technology very often, and I think they probably are not always very good at explaining what those opportunities are. I think there is a growing scope for doing more and that is something, partly because of my interest in education over the years, I do want us to concentrate on more.
Dr Tyler: Perhaps I can give one example which is particularly pertinent to the nature of a lot of the defence work that is going on in Scotland. There is a forum that you may have come across called the United Kingdom Naval Engineering Science and Technology Forum and I believe you had the chairman here at one of your previous hearings.
Q505 Mr Davidson: People in my constituency speak of little else!
Dr Tyler: Do they? I am very gratified because I was one of the founder members of it, so I am pleased about that. To emphasise what the Minister said, the interesting thing about that Forum is that it is pan-MoD and industry. We have got together recognising a collective challenge here which affects us all, it affects the Ministry of Defence as well as industry. We all need to have a high level of skilled personnel going forward and it is a challenge to us to be able to deliver what we need. The UK NEST Forum is doing very practical things to try and address things. The sort of thing we are doing at the moment, for example, is funding a special campaign using Internet technology particularly for the, as we call it, "Facebook generation" to try and excite, in particular, school leavers and under-graduates to apply their engineering, science and technology degrees in the defence arena. We realise that in defence we are competing across a broad sector and what we want to do is encourage school leavers to take engineering, science and technology and those under-graduates to then consider defence as a good place in which to have their careers. That is something that has been co-funded essentially across industry and MoD.
Mr Morse: At the same time we recognise that part of this is developing continuous funding for science and technology and research and development. We are working with industry to come up with new ways of doing that, so you do not find yourself having a research project hitting the valley of death and then suddenly there is a gap and no money and it gets lost. A lot of it is about using our money more wisely, working with industry to develop continuous development projects, so the reality is there should be more continuous research projects going on to get people engaged.
Q506 Mr Davidson: I think that is very constructive but it has got a very low profile in Scotland and maybe we ought to look at ways in which the profile of the MoD contribution to all of that could be raised given the nature of the problems. Could I move on to another question about what happens to the joint shipbuilding venture once the Carriers and the Type 45s are finished? We have already touched on, I think, the Solids and the JSBLs and so on, but we do not want to have full order books and then suddenly drop off the edge. Can you just clarify what the plan is for the shipyards after the end of Carrier?
Baroness Taylor of Bolton: Again, that is something that is part of the negotiations that are going on and will go on. MoD can move ahead but it cannot move ahead definitely. We have mentioned not just the Carriers, not just MARS, but also the frigate programme. With all of those together we are looking a great deal into the future. I go back to my figure from earlier, £14 billion over the next ten to 15 years. That kind of spending puts us in a very strong position and it is one where we would want to talk through with industry, the best way of maintaining the drumbeat of work as good as we can get it, but also making sure that we get the vessels that we want and value for money for the taxpayer. Those are the kinds of things that we have to balance. We are looking as far ahead as we possibly can at the moment and there is an awful lot of work in that.
Q507 Mr Davidson: All of these solutions are predicated upon Scottish yards providing ships to the Royal Navy as being part of the whole market. Has the MoD been thinking ahead to what would happen if Scotland became a foreign country?
Baroness Taylor of Bolton: That would change the terms of all of this significantly, but we have not done any particular project into that possibility.
Q508 Chairman: The Scottish shipbuilding and defence industries are largely dependent on MoD orders.
Baroness Taylor of Bolton: Yes.
Q509 Chairman: If Scotland becomes independent do you think that the industry will relocate their businesses and there is a potential threat to the sustainability of the defence industry in Scotland?
Baroness Taylor of Bolton: Well, one of the things that we have to consider when we are having orders is our operational sovereignty and it is true that we have some arrangements on some projects with other countries but operational sovereignty is always a factor and is very important to us and one of the things we would have to consider.
Dr Tyler: When we are looking long-term, as the Minister has said, it really is unwise and impossible to be predicting specific projects at specific periods in time so far ahead. Under the Defence Industrial Strategy the focus is far more on sustainability of our operational sovereignty, that is the critical thing we wish to protect and sustain the skills and capability that give us operational sovereignty for the long-term. That would be our focus if we were looking at the long-term strategic picture.
Q510 Mr McGovern: Industry has said they believe that a 5,000 tonne ship per year and a new design every five years is the minimum level of work necessary to sustain a UK shipbuilding industry. What figure do you think is the minimum necessary? If you do have a figure, on what evidence would you base it?
Dr Tyler: We need to look at this in the round. If we were going to have, as we expect, a long-term vibrant shipbuilding industry the likelihood is it would be doing more than just one 5,000 tonne frigate for the Royal Navy per year. We have talked about future work in the MARS programme, the Royal Navy still has a large fleet and there will be replacement of those ships ongoing in the future as well and we would also expect, as they are today, British industry to continue to be successful in export work. I would expect to see the future sustainable shipbuilding industry of the future having a rich mix of both Royal Navy activity on a variety of ships, the frigates of which will be a long-term large-scale programme, of that there is no doubt, it will be a good foundation workload. But on top of that I would expect to see other Royal Navy ships, and we have talked about the other MARS project ships, and export work to give a balanced workload for the business.
Mr Morse: It is important to remember that. Of course, we want to give reassurance to industry but we also want industry to be trying pretty hard to achieve results themselves and to achieve business themselves. We want that from the point of view of the taxpayer too. There is a happy balance to be achieved in recognising that empty yards are not good news for anyone but, on the other hand, making sure that it matters to them whether they really exert themselves to bring in business or not.
Baroness Taylor of Bolton: And that we are getting value for money.
Q511 Mr McGovern: I am quite certain the industry would aspire to better figures than that, but they think that is the absolute minimum necessary. Do you agree with their figures or do you have another figure?
Mr Morse: There is a minimum necessary and that is a matter for discussion between us and industry and to a degree this is a negotiating matter, is it not?
Baroness Taylor of Bolton: It is a negotiating matter but we have outlined the kind of work that we envisage over the next quite considerable period and, as I said, I think that is more work than British shipyards have had for decades.
Q512 Mr Davidson: Can I just follow that up. If the capacity of yards in England was insufficient for that programme of work that you have outlined, presumably the additional work would be advertised throughout the European Union initially with no guarantee that work would automatically come to Scotland in the event that they were separate countries?
Baroness Taylor of Bolton: That is correct.
Q513 Ms Clark: You mentioned at the beginning the number of civilian jobs related to the Trident nuclear weapons system and I think you said it was in the region of 850 direct civilian jobs and 280 indirect civilian jobs in Scotland. Would you be able to give us a breakdown of those jobs both by skill and location, either today or in writing afterwards?
Baroness Taylor of Bolton: I certainly cannot do it today and I am not sure I can do it by skill. We could probably do it by location in general terms. I think what we said was there are 850 civilian jobs directly relying on Trident, 580 civilian jobs at the base, 270 elsewhere and 250 on top of all of that indirectly. If we have got any more detail I will let you have it, but that is the general breakdown that we have.
Q514 Ms Clark: I am very grateful for that. The other question is related to the future of HMS Vulcan at Dounreay. I have been advised that the MoD and Rolls-Royce are keen to use a new reactor for the Trident replacement submarine and this may require a prototype at Dounreay. Is that something that you are able to tell us about?
Dr Tyler: Not at this stage, no. It is still very much in the planning.
Baroness Taylor of Bolton: It is very early days.
Dr Tyler: It is very early days and we could not be more specific about that at this point.
Q515 Mr Davidson: Following on from the point about Faslane, Babcock have now got contracts at Faslane but also operations down south. Can I ask what steps are being taken to ensure that while the United Kingdom remains united there is not a transfer of work down south in anticipation of any constitutional change?
Baroness Taylor of Bolton: I do not think that constitutional change has been the driving force for anything and I am certainly not aware of any deliberate decision to move jobs away from there on that basis.
Dr Tyler: Absolutely not.
Baroness Taylor of Bolton: At this stage.
Q516 Chairman: Can I thank the witnesses for their attendance this afternoon. Before I declare the meeting closed, perhaps you want to tell us some good news about anything?
Baroness Taylor of Bolton: Very little has changed in the last hour and a half.
Q517 Chairman: Are there any areas that you think we have not covered during our questions?
Baroness Taylor of Bolton: No, that is fine.
Chairman: Thank you very much.
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