House of Commons - The Referendum on Separation for Scotland: Separation shuts shipyards

The Referendum on Separation for Scotland: Separation shuts shipyards - Scottish Affairs Committee Contents

4 Options for the Scottish yards

A future Scottish Navy

47. The complex warships built for the Royal Navy have many roles and are involved in operations across the globe in support of the United Kingdom's foreign and defence policy. The Royal Navy has recently been in action off the coast of Libya, helped civilians out of Lebanon when war broke out in 2006 and delivered aid to Haiti following the 2010 earthquake.[83] On 4 September 2012, one Type 42 destroyer, two Type 45 destroyer and five Type 23 frigates were on operations for the Royal Navy.[84]

48. The foreign, security and defence policy motion agreed at the SNP October 2012 conference recognised that Scotland would have responsibility to defend its extensive coastline and islands, important under-sea and offshore infrastructure, with neighbours share a responsibility towards the North Sea and north Atlantic, and that:

Scotland will require military capabilities to fulfil these responsibilities.

In addition, it said that their proposed armed forces would include:

deployable capabilities for United Nations sanctioned missions and support of humanitarian, peacekeeping and peace-making 'Petersburg Tasks'.[85]

49. In evidence we heard that the priorities for a Scottish navy would probably be fishery protection, defending the North Sea assets, and sea denial.[86] In order to carry out these activities, the SNP motion said:

The Scottish defence and peacekeeping forces will initially be equipped with Scotland's share of current assets including ocean going vessels

[...] A Scottish defence industrial strategy and procurement plan will fill UK capability gaps in Scotland, addressing the lack of new frigates, conventional submarines and maritime patrol aircraft.[87]

50. This is relevant for the future of the Scottish shipyards. The total UK defence budget is £34 billion. The total value of the Type 45 destroyer programme alone is near £6.6 billion.[88] At the moment, the UK spends about 2.2% of its GDP on defence. The average for NATO, excluding high spending UK and France, is around 1.4%. If a separate Scotland spent about 1.4% of its GDP on defence, it would have a budget, depending on the accounting of oil revenues, of somewhere between £1.7 billion to £2.1 billion per annum.[89] The SNP defence and security motion said that a separate Scotland led by the SNP would commit to an annual defence and security budget of £2.5 billion. A proportion of this would be available to be spent on a navy—the model of proposed Scottish armed forces by Stuart Crawford and Richard Marsh suggested a navy that cost around £650 million.[90] For comparison, the unit cost of producing a single Type 45 destroyer is £651 million,[91] and the operating costs for the first two Type 45 destroyers, in 2011-2012, was £101 million.[92]

51. Evidence to this Committee has suggested that, on a reasonable division of assets, Scotland might expect to acquire two frigates and a number of other small vessels from its share of the Royal Navy. The Crawford and Marsh model suggested that Scotland could negotiate for a couple of frigates and a number of offshore patrol vessels and mine counter measure ships.[93] In comparison, the Danish Navy has seven frigates and a number of different smaller vessels, the Norwegian Navy has five frigates and a number of smaller vessels, and Ireland has eight large patrol boats.[94]

52. If Scotland inherited assets from the Royal Navy that matched its needs, then it would not have to build warships. If the division of assets did not meet Scotland's needs, then a separate Scotland would need to acquire additional vessels, which could include building them,[95] and thus provide work for Scottish yards. It is unclear how the Scottish Government would ensure that the Scottish yards could be occupied from day one. Neither is it clear what level of commitment they would offer that would address the issues identified by the TOBA and ensure the 'drum beat' of work continued at a steady rate. If the Scottish yards were to build less complex ships, then we are unclear if the level of work would stop those who build complex warships, like those designing the Type 26, from moving to Portsmouth.

53. Like the Royal Navy, a future Scottish navy would need to maintain and provide support to its ships. This work could not occupy both Faslane and Rosyth, because it would be on a much smaller scale of activity. We understand the Scottish Government has made a decision, in principle, that as much work as possible would be allocated to Faslane. This would nowhere near fill the gap created by the departure of the entire fleet of Royal Navy submarines and surface vessels currently based at Faslane. The maintenance cycle would also have to be considered when assessing the availability of warships to contribute to overseas engagements or humanitarian missions. Stuart Crawford's model of a future Scottish defence force consisted of two frigates that would "allow a Scottish Government to contribute to joint military exercises or operations."[96]

54. The SNP October motion also said that Scotland would become a member of NATO on its own terms, which included the removal of all nuclear weapons from Scottish soil and the right to take part only in UN sanctioned operations. If it was not allowed to be a member of NATO on these terms, then Scotland would "work with NATO as a member of the Partnership for Peace programme like Sweden, Finland, Austria and Ireland."[97] We are unsure how many frigates a separate Scottish navy would need so that it could carry out a conventional domestic security role, an overseas engagement and undergo maintenance or even training exercises.

55. We remain unconvinced that the likely size of any future separate Scottish defence procurement budget would be large enough to buy any of the complex warships currently built in Scotland, nor would they have, on the evidence we have seen, a use for such warships.

56. The UK Government, through the TOBA, committed to three ship building programmes: the Type 45 destroyers, the Queen Elizabeth Class aircraft carriers, and the Type 26 frigates. The first two have benefitted Scottish shipbuilding and the third has the potential to provide work for well over a decade to come. We are aware of the scale of the potential work available if Scotland remained in the Union.

57. A separate Scotland might inherit assets from the Royal Navy. Inherited assets might meet the needs of the Scottish navy, in which case it would not appear to need to build any new ships. If inherited assets did not meet the needs of a possible Scottish navy, then it would be helpful to know what warships the Scottish Government have identified they would need and might wish to have built in Scotland.

58. We urge the Scottish Government to recognise that the Royal Navy is the major customer for the Clyde shipyards but will only remain so if Scotland is part of the United Kingdom. The Scottish Government should now set out how it proposes, in the event of separation, to match the level of work provided by the Royal Navy. The workforces in Govan, Scotstoun and Rosyth need to know their futures as soon as possible.

Submarines

59. The foreign, security and defence policy motion agreed at the SNP October conference said it does not want Scotland to "host nuclear weapons" and wants to see the "speediest safe transition of the nuclear fleet" from Faslane. At the same time as enforcing the removal of nuclear-powered submarines that are currently, or going to be, based at Faslane, a:

Scottish defence industrial strategy and procurement plan will fill UK capability gaps in Scotland, addressing the lack of new frigates, conventional submarines and maritime patrol aircraft.[98]

60. The UK's nuclear submarine fleet does not just provide the platform for launching the Trident missile. The fleet has a variety of roles: defending British territorial waters, reconnaissance, shadowing and escorting other Royal Navy vessels, surveillance of enemy submarines and ships, and importantly to take part in covert, and overt, operations: HMS Triumph, a Trafalgar Class submarine, was recently deployed in Operation Ellamy off the coast of Libya in 2012.[99]

61. The SNP proposal mentions the need to defend its coastline and islands, under-sea and offshore infrastructure and, with allies, contribute to safeguarding the North Sea and north Atlantic. Some witnesses were unsure if a separate Scotland would need submarines, and it would clearly depend on its defence policy. Professor Trevor Taylor said:

The first thing for me would be that whether or not an independent Scotland needed conventional submarines at all would be a function of the defence policy, which is yet to be written. It is the defence policy that would have to come first rather than a solution.[100]

And Professor Chalmers said:

You would have to think about what the shape of a Scottish Navy would be. Like Norway, it might like to have a couple of submarines.[101]

62. Dr Phillips O'Brien, University of Glasgow, looked at four comparable countries, Norway, Denmark, New Zealand and Ireland. Only Norway has a fleet of submarines—six ULA Class diesel electric submarines—and these had been built as a joint exercise between Norway and Germany.[102] Notably the Norwegian submarines were assembled in Germany.[103]

TO BUY OR TO BUILD

63. The UK only has nuclear-powered submarines, so if a separate Scotland intended to have conventional submarines, then it could not inherit them from the Royal Navy.[104] Similarly, there are no British yards that build conventional submarines.[105] If so, then the Scottish defence and industrial strategy and procurement plan would have to either buy them or build them. It is possible to buy second-hand or off-the-shelf submarines, the only model of a possible Scottish defence force that we are aware of, from Stuart Crawford and Richard Marsh, did not include submarines in the short to medium term, principally on cost grounds, but they agreed that: "In the longer term, Scotland might wish to consider off-the-shelf purchase of conventionally-powered and armed submarines of the type built by Germany or Sweden."[106] Importantly, for the purposes of this Report, that would not provide work for the shipyards on the Clyde.

64. If Scotland was to build submarines, then it could happen two ways: the first would be to develop the ability to design, develop and build submarines. This would involve significant technological and financial risk considering the lack of experience in Scotland in submarine construction, and as a result it is very difficult to estimate the costs of developing the ability to design and build.[107]

65. Alternatively, Scotland could enter into an agreement with another European country and arrange licensed assembly of an established design in its own shipyard. Francis Tusa said DCNS in France or ThyssenKrupp Marine Systems in Germany offered this service:

They would take engineers and workers from Govan to those yards to show them how they are built. [...] If you look at DCNS, they are building submarines with and for the Brazilian Navy where precisely this practice happens. The first one/two get built in France and the rest are built in country, and they do technology transfer.[108]

66. Even so, several witnesses told us that the cost of building submarines would be prohibitively expensive for Scotland. Ian Godden said:

It would probably be the most expensive submarine in the world. [...] We have a problem with six submarines keeping the drum beat going over time. You need to be buying six. You are just postponing the problem if you don't have a drum beat continuing. You need at least six submarines to order to keep the drum beat over a period of time; otherwise, the fixed costs of both design and manufacture of a one-off or two things are enormous.[109]

Dr Louth said that:

A back-of-a-fag-packet analysis would probably give through-life costs greater than the whole of your GDP for a couple of years or an independent Scotland's GDP for a couple of years. In terms of proportion of GDP per annum, you would probably be on a par with the United States rather than NATO averages of 1.5%.[110]

The United States spend 4.9% of their GDP on defence.[111]

67. Dr Louth said that if a separate Scotland wanted submarines, then "intuitively its defence budget is not £2 billion."[112] Professor Taylor calculated that, given an assumption of a defence budget between £1.7-£2.1 billion, and if Scotland followed the broad European average for the proportion of its defence budget spent on new equipment—about 16%—then this would mean an annual equipment spend of between £272-£336 million—equivalent to about one submarine. For comparison, four of the joint French/Spanish Scorpene submarines are being exported to Brazil, with the first one built in France/Spain, then the next three were built in Brazil. These cost around £336 million each. The Russians exported six Kilo/Project 636 Class submarines to Vietnam, which were all built in Russia and cost around £208 million each.[113]

SKILLS REQUIRED TO BUILD SUBMARINES

68. Submarine building requires very specialist skills that differ from those for shipbuilding. When we visited the shipyard in Govan, one of the trades union representatives told us, "When we on the Clyde tried to build submarines they floated, when the people in Barrow tried to build ships they sink." And Ian Godden told us: "You build a submarine in-out and you build a ship out-in. Basically, the fundamentals are very different."[114] BAE found out that, during the development of Astute, the skilled workforce who worked on surface ships could not simply move into submarine construction.

69. So, assuming the experienced workforce on the Clyde did not relocate to England with the ship contracts, the workers on the Clyde would have to learn the necessary skills. Francis Tusa pointed out that this would involve a steep learning curve for the Scottish yards:

It is different from building a surface warship. The minimum number you have to do is four. Below that the economies of scale are insane, because there are not any. If you were building four, the first one would almost certainly come out of either the TKMS yard in Germany or the DCNS yard in France. They would take engineers and workers from Govan to those yards to show them how they are built.[115]

70. Professor Taylor pointed to the difficult experience of Australia in attempting to design and build its Collins Class submarines. The Australian Government announced its intention to build submarines in its 1981-82 budget; construction began in 1989, with the intention of the first submarine to be commissioned into service in 1995. The exercise encountered problems at each stage of development, during sea trials and continuing when it had entered service. The first Collins submarine was finally approved as operational in 2000.[116]

71. Francis Tusa estimated that, based on shipyards where submarines are built in Europe, the workforce required to build a four-boat fleet of conventional submarines in Scotland would peak between 500 and 600 during construction, and would then fall to around 100 and 150 for long term service support.[117] (This would compare to the current workforce of 2,800 on the Clyde and 1,000 at Rosyth.) The Kockums yard in Sweden employed 300-400, and the Navantia yard in Spain employed 400-600 at its construction peak, but this later reduced to 200-300.

72. Whichever method Scotland chose to acquire submarines, it is questionable as to how quickly it could acquire the capability, and it is certainly inconceivable that the work to build submarines would start in time to catch the tail off after the carriers build finished. If Scotland chose submarines, it would need to be part of a considered defence strategy, as Dr Louth told us:

It is very dangerous—I would even say foolhardy—to disconnect defence industrial policy from notions of purposefulness and defence capabilities. If we have defence industrial policy running defence policy because it is jobs-based rather than capability-based, that is pretty dysfunctional and very unusual given the responsive nature of sovereign states.[118]

73. A separate Scotland could decide it needed conventional submarines. The UK does not have any conventional submarines so it could not inherit any from the Royal Navy. Scotland could build its own submarines from scratch, after developing the skills to design and build from the start, or it could buy a pre-existing design under licence to build a proportion in Scotland. Either method would be prohibitively expensive. Any investment in buying diesel electric submarines would reduce the resources available to invest in other capabilities.

74. The shipbuilding workforce in Scotland does not currently have the specialist skills needed to build submarines. Acquiring those skills would be a lengthy and costly process, and might create 500-600 jobs during construction and at best sustain 150 jobs over the long term.

Exports

75. After he had met with the Ministry of Defence Ministers in May 2012, Kenny Jordan, Confederation of Shipbuilding Unions, asked what the Scottish Government would do to replace Royal Navy contracts.[119] There have been suggestions that the Scottish yards could remain open because the skills base in Scotland would generate sufficient export orders.[120]

76. Scottish shipbuilding's strength is in building complex warships, including innovative design and the latest technology. (The defence industry in Scotland is generally high technology.[121]) The result is a very capable warship, but also a highly expensive warship and this restricts the potential number of foreign buyers—BAE did not find any export buyers for the Type 45 destroyers. A separate Scotland would find itself in a competitive market against other shipbuilders from Germany, Netherlands, Spain, China and South Korea.[122]

77. In the past, the UK has built and exported ships to countries including Brazil, Trinidad and Tobago and Brunei,[123] and the Portsmouth yard is currently building offshore patrol vessels for Oman.[124] The bulk of these contracts have been for smaller less sophisticated types of ship, which means they require a smaller scale of production, and, as Francis Tusa pointed out, the workforce required to build an OPVs is a small percentage of that required for the Type 45.[125] The last order for ships of a significant size, that were entirely built in Scotland, were two frigates for the Malaysian navy in 2001-02.[126]

78. Several countries, including Australia, Brazil, Canada, India, Malaysia, New Zealand and Turkey, have all expressed some interest in the Type 26, but only Brazil appears to be pursuing this and on condition that it builds the ships under licence in its own yards.[127] Indeed, most of the recent export successes from BAE have been for design only or involved technology transfer so the work takes place in the buying country shipyards.[128] And if a separate Scotland wanted to build the Type 26 frigate for export, it would have to do so with the agreement of, and on licence from, BAE Systems and the Ministry of Defence. The UK is the second largest defence exporter in the world,[129] and part of that is because of the products' association with the Military of Defence. As Professor Taylor told us:

Even export orders that are ostensibly for foreign customers actually came about because of a Ministry of Defence commitment to that piece of equipment.[130]

79. There is a range of questions about what kinds of warship a separate Scotland might try to build and export, particularly if its own navy is limited in size and is not able to match the combat effectiveness of the Royal Navy. There is a huge question mark over the viability of the Scottish yards in a separate Scotland.

Shared procurement with the UK

80. The foreign, security and defence policy motion agreed at the SNP October conference said that "Joint procurement will be pursued with the rest of the UK and other allies".[131] The UK currently takes part in several joint procurement exercises, Typhoon being an obvious example. Indeed, it is a growing theme within NATO for countries to share defence procurement where it benefits all parties. It is an obvious way of pooling resources where defence budgets are reduced. However, we are not aware of the UK building a warship as part of a joint procurement exercise. The nearest example would be the relationship with the USA around nuclear submarines, or the modifications to the Queen Elizabeth Class aircraft carriers to accommodate the take-off requirements of future jointly procured fast jets.[132]

81. It would represent a considerable departure from established practice for the Ministry of Defence to enter into joint procurement of a new warship that specifically involved the construction phase outside of the UK. The UK has said that where it enters into such arrangements, it does so with those nations who closely share its foreign and defence policies.[133] Yet one of the SNP's stated policies is explicitly not to have the same foreign and defence policies as the UK. For example, the First Minister, Alex Salmond MSP, has said:

The great argument in favour of having a Scottish Defence Force is two-fold—one, you wouldn't have to have the biggest concentration of nuclear weapons in Western Europe situated in Scotland, which many people support the removal, and secondly of course, we'd have the right to decide whether or not to participate in international engagements."[134]

And as Professor Chalmers told us:

If an independent Scottish Government were to insist on the Trident submarines being removed rapidly without the UK Government having anywhere to put them, that would create a very bad atmosphere between Scotland and the UK, and indeed between Scotland and the wider international community. It is one thing accepting a re-division of territories, which very few other countries in NATO would sympathise with at all,[135] but quite another if it was seen to be taking a radically different foreign policy course, and that is what rapid expulsion would be.[136]

82. At the same time, while recognising the shipbuilding skills in Scottish yards, there are other shipyards in the UK, and, if forced to do so, BAE Systems could build the warships that the UK needs in yards in England.

83. A separate Scotland could be expected to develop its own foreign and defence policies. The SNP is explicitly committed to developing a divergent foreign and defence policy, including the eviction of Trident at great expense and inconvenience for the UK and its NATO allies, and the establishment of different criteria for involvement in overseas deployments. This is hardly the best way to persuade the UK to enter into any joint procurement.

83 www.royalnavy.mod.uk Back

84 HC Deb 7 Sep 2012 Col 454W Back

85 The Petersberg tasks were set out in the Petersberg Declaration adopted at the Ministerial Council of the Western European Union (WEU) in June 1992. www.europa.eu Back

86 Q 273, Q 281, Q 565 Back

87 Resolution to SNP conference: Foreign Security and Defence Policy Update. www.moraysnp.org Back

88 Scottish Affairs Committee, The Implications for Scotland of both the Strategic Defence and Security Review and the Comprehensive Spending Review, 7 February 2012, HC 580-II, Session 2010-2012, Q 137 Back

89 Q 158 Back

90 Stuart Crawford and Richard Marsh, A' The Blue Bonnets, RUSI, October 2012 Back

91 HC Deb 21 November 2012, col 497W Back

92 HC Deb 24 October 2012, col 879W Back

93 Stuart Crawford and Richard Marsh, A' The Blue Bonnets, RUSI, October 2012 Back

94 Written evidence from Dr Phillips O'Brien, HC 139-II, session 2012-13 Back