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Defence Questions

12th September 2016

Harriett Baldwin answers questions on defence procurement.

Defence Spending: Small Firms

Victoria Prentis (Banbury) (Con)

4. What steps he is taking to increase the level of defence spending with small firms. [906242]

Alberto Costa (South Leicestershire) (Con)

10. What steps he is taking to increase the level of defence spending with small firms. [906248]

The Parliamentary Under-Secretary of State for Defence (Harriett Baldwin)

Small businesses are crucial for growth and innovation in this country, and we want them to take an increasing share of our growing defence budget. We are committed to achieving 25% of our procurement spend being with small and medium-sized enterprises by 2020. That target is 10% higher than the one set during the last Parliament.

Victoria Prentis

May I say how nice it is to see my hon. Friend in her place? May I drill down a little and ask her what steps she can take to ensure that the Ministry of Defence’s largest customers use small firms to deliver their contracts?

Harriett Baldwin

My hon. Friend is absolutely right that it is essential that we work on that not only in our direct defence procurement process but with our supply chains. I am delighted to be able to let the House know that the supply chain advocate network and the supply chain champions, which my predecessor announced, are well under way, and that last year the Ministry of Defence was able to have direct spend with almost 5,000 different companies.

Alberto Costa

What measures can the MOD take to reduce the regulatory burden on small firms such as those in my constituency when they make applications for defence equipment procurement?

Harriett Baldwin

My hon. Friend is right to highlight ways in which we can make the process easier for small and medium-sized businesses. For example, this year we removed the turnover requirement in the pre-qualification process, and we are working towards simplifying the contract terms and reducing them to just three pages.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op)

I welcome the Minister to her new position. Will she take notice of what happens in Huddersfield, where we have ​David Brown Gear Systems and many other fine companies making things that our defence forces want? Will she dissociate herself from the term “fat and lazy”, which was used about British businessmen? We have no fat and lazy businessmen in Huddersfield.

Harriett Baldwin

Those were certainly not my words, and I pay tribute to the many businesses in Huddersfield and South Yorkshire that do such wonderful work in supplying the Ministry of Defence.

Richard Arkless (Dumfries and Galloway) (SNP)

On Wednesday I raised the issue of an engineering company in my constituency that had gone into administration. I place on record my appreciation of the Minister, who, at very short notice, scrambled around and rearranged her diary to meet the administrators, who are in the Gallery today. We thank her very much. In advance of that meeting, will she agree to work with me and the administrators to leave no stone unturned, so that we can do our best to save valuable jobs and engineering experience at Penman?

Harriett Baldwin

The hon. Gentleman is working hard to represent the interests of his constituents; not only did he raise this case last week at Prime Minister’s questions but I am pleased to say that we will be able to meet him and the administrators later today.

Mark Pawsey (Rugby) (Con)

In Rugby we are very proud of the contribution that GE Power Conversion is making to the Type 26 global combat ship programme; it is also important to recognise its contribution to the local economy through the orders it places with subcontractors and through local small businesses.

Harriett Baldwin

My hon. Friend is absolutely right to highlight that earlier this year we were able to announce contracts for some of the long lead-time items as part of that programme, and also to highlight the way in which small and medium-sized businesses play such an important role in that supply chain.

Kate Hollern (Blackburn) (Lab)

It is interesting to listen to the Minister. I greatly support the aim of 25% of defence expenditure being with small and medium-sized enterprises by 2020. However, figures published last month showed clearly that only 2% of spending went to companies assessed as SMEs. The SME status of suppliers is determined by independent verifiers. Why has there been no assessment of new MOD suppliers since 2014? Is the Department resorting to creative accountancy?

Harriett Baldwin

I do not recognise the figures that the hon. Lady cited. I can confirm that in 2014-15 we spent 19% with small and medium-sized businesses. She will be aware that, as she highlighted, the contract with Dun and Bradstreet for evaluating the characteristics of different firms, which is a Cabinet Office contract, ended in 2014. We are in the process of discussing with Cabinet Office colleagues what the successor framework will be like.

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Defence Procurement: Steel Industry

Christina Rees (Neath) (Lab/Co-op)

7. What steps he is taking to ensure that the British steel industry and its workers benefit from current and future defence procurement. [906245]

The Parliamentary Under-Secretary of State for Defence (Harriett Baldwin)

We positively encourage bids from British companies to ensure they are in the best possible position to win future steel contracts. We have issued new policy guidance to address the barriers which might prevent UK steel producers from competing effectively in the open market.

Christina Rees

Now that Government Departments are mandated to provide information about the proportion of UK steel used in the Crown Commercial Service, will the Minister please tell the House what percentage of UK steel is used in current defence projects and what percentage will be used in future?

Harriett Baldwin

The hon. Lady rightly speaks up for steel production in her constituency. She will be very pleased to know that, for the largest project that the UK Government have ever procured that uses steel—she will be aware that that is the carrier programme currently under construction on the Clyde—the vast majority comes from Tata Steel. I believe it is 94%.

Tom Pursglove (Corby) (Con)

I wholly support the increasing use of small firms for defence procurement, but will the Minister undertake to encourage those small firms to use British steel wherever possible?

Harriett Baldwin

My hon. Friend is absolutely right that it is a process of encouraging competition not only within the procurement process, but where there are long lead-time items. In our strategic defence and security review, we clearly set out the largest programme of investment in ships for some time, and there will be a lot of long lead-time items. Small business and producers will be able to work with those who are procuring contracts with prime contractors to find a place in that supply chain.

Kate Hollern (Blackburn) (Lab)

Recent defence procurement decisions have failed to take into account the benefits to the UK economy gained by manufacturing domestically. A growing number of products, particularly steel, are procured abroad. Will the Minister therefore commit to assess the wider economic and social benefits derived from building the three new solid support vessels in the UK with British steel, and to share that information with the House?

Harriett Baldwin

The hon. Lady is right again to highlight the fact that, in our strategic defence and security review, we set out a programme in which we are investing in more ships and more aeroplanes, and there is more cyber-investment. She mentions the solid support ships. They will not be procured until later in the Parliament, but I assure her that we will do everything we can with those long lead-time items and the programmes that have been set out in advance to ensure that British companies, including British steel companies, have all the information they need to be successful.

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Defence Procurement: Single-source Contracts

Nigel Mills (Amber Valley) (Con)

8. What recent assessment he has made of the value for money obtained from single-source defence procurement contracts. [906246]

The Parliamentary Under-Secretary of State for Defence (Harriett Baldwin)

Competition remains the best way of securing value for money but sometimes we need to place single-source contracts. We therefore established a new regime backed by statute with an independent regulator to ensure contract costs and profit rates are both reasonable and transparent.

Nigel Mills

I thank the Minister for that answer. If the Single Source Regulations Office to which she refers seeks to proceed with its current proposal to reform the profit rates on those contracts, will she commit that those changes will this time have the Government’s support?

Harriett Baldwin

Yes, in March this year we reduced the profit rate on single-source contracts from 10.6% to 8.95%. The regulator will then recommend a rate for 2017, which we will consider carefully, along with its recommendation on multiple profit rates.

Mrs Madeleine Moon (Bridgend) (Lab)

What steps will the Minister take to ensure that, where single-source contracting is placed abroad with, say, American companies, there are appropriate levels of set-aside, so that apprenticeships and the seed-corning for future capability in British defence companies are protected and facilitated?

Harriett Baldwin

The hon. Lady will be aware that that is an ongoing subject of discussion, and of the commitment that General Dynamics has made in Wales in the part of the world she represents to create 250 jobs in the supply chain for the Ajax vehicles.

Mr Philip Hollobone (Kettering) (Con)

Whether contracts are derived from single source or open competition, unnecessary costs can be incurred when design specifications are changed after the contract has started, for example with the Type 45s. What steps is the Minister taking to ensure that late changes after contracts have started no longer occur?

Harriett Baldwin

My hon. Friend is right to highlight one of the major themes that came out of the review into how we can improve defence procurement. As he rightly points out, there were problems with the design of the Type 45, which was ordered at the beginning of the previous decade, that have subsequently been costly to rectify. That is why we now take such care on design: to prevent such things from happening in future.

Andrew Gwynne (Denton and Reddish) (Lab)

I welcome what the Minister said in answer to an earlier question about targets that are in place to ensure small and medium-sized enterprises in the UK benefit from defence procurement. When she is considering value for money and single-source contracts, can she assure the House that value for money includes British jobs, British skills and, as my hon. Friend the Member for Bridgend (Mrs Moon) said, investment in apprenticeships?

Harriett Baldwin

I thank the hon. Gentleman for mentioning apprenticeships and our commitment to continuing to work with our single-source suppliers. We can clearly see that they are some of the lead providers of apprenticeships across the defence procurement area.

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Defence Procurement: Type 31 Frigate

Mr Douglas Carswell (Clacton) (UKIP)

12. If he will make it his policy to co-operate with NATO members at the concept and assessment stage of the procurement cycle for the Type 31 frigate. [906250]

The Parliamentary Under-Secretary of State for Defence (Harriett Baldwin)

While we must maintain the UK’s freedom of action to operate independently, interoperability with our NATO allies is fundamental to virtually all UK defence capabilities. For the general purpose frigate, the Royal Navy is already exploring how that could be delivered, and considering how the ship will operate within NATO.

Mr Carswell

Does the Minister agree that opening up more of the procurement process to a broader range of suppliers, and avoiding any hint of protectionism, may make it possible to keep the cost of replacing our frigates low?

Harriett Baldwin

The hon. Gentleman takes a close interest in defence procurement issues, and I know that, like the rest of the House, he will be eagerly anticipating Sir John Parker’s national shipbuilding strategy, which he has committed himself to publishing before the autumn statement. In that context, the hon. Gentleman will obviously be aware that complex warships can only be built in the United Kingdom.

Douglas Chapman (Dunfermline and West Fife) (SNP)

When can we expect an announcement on the building of the Type 31s? We have the capability, we have the skills, and presumably we have the budget. Scotland expects!

Harriett Baldwin

Let me gently remind the hon. Gentleman that we are building these ships because we all decided to remain part of the United Kingdom. We are in the process of providing our armed forces with more ships, more aircraft and more equipment than ever before. As soon as we have a concrete timetable to announce to the House, we will do so.

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Topical Questions

Tristram Hunt (Stoke-on-Trent Central) (Lab)

T2. Easat Radar Systems in Stoke-on-Trent is a cutting-edge business supplying coastal-based radar surveying UK waters and exporting round the world. This is the kind of British-based defence manufacturing we need as Russia continues to test our defences and security concerns about breaches to our coastline grow. The Minister for Defence Procurement is already coming ​to Stafford. I invite her to come to Stoke-on-Trent afterwards to visit Easat Radar Systems to give the business the support it deserves. [906205]

The Parliamentary Under-Secretary of State for Defence (Harriett Baldwin)

The hon. Gentleman is a doughty champion of businesses in Stoke-on-Trent. I know that the Secretary of State has already offered a meeting with businesses in that constituency, and I look forward to hearing more about the particular one he mentioned in his question.

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Toby Perkins

Thank you; very kind. A few moments ago the Under-Secretary of State for Defence, the hon. Member for West Worcestershire (Harriett Baldwin) said that we were procuring more warships and aircraft than ever before. That is far removed from reality. In setting the record straight, can she confirm whether such information is part of the induction into the Ministry of Defence team, or did she come up with it all by herself?

Harriett Baldwin

I recommend that the hon. Gentleman read the strategic defence and security review. He can see that we are increasing defence spending every year and we are investing in more ships, more planes, more troops who are ready to act, better equipment for our special forces and more for cyber, in contrast to the Labour party, which wants to scrap our nuclear deterrent, withdraw from NATO and abolish our Army. Labour cannot be trusted with our security.​

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