Defence Committee
Oral evidence: National shipbuilding strategy refresh, HC 181
Tuesday 5 July 2022
Ordered by the House of Commons to be published on 5 July 2022.
Watch the meeting
Members present: Mr Tobias Ellwood (Chair); Dave Doogan; Richard Drax; Mr Mark Francois; Gavin Robinson; John Spellar; Derek Twigg.
Scottish Affairs Committee member also present: Pete Wishart.
Questions 41 - 154
Witnesses
I: Rt Hon Ben Wallace MP, Secretary of State for Defence; Vice Admiral Sir Chris Gardner KBE, Director General (Ships), Defence Equipment & Support, Ministry of Defence; Rear Admiral Paul Marshall CBE, Director, Navy Acquisition, Senior Responsible Owner – T31 and FSS, Ministry of Defence; Rear Admiral Rex Cox, CEO, National Shipbuilding Office, Ministry of Defence.
Witnesses: Ben Wallace, Vice Admiral Sir Chris Gardner, Rear Admiral Marshall and Rear Admiral Cox.
Chair: Welcome to this Defence Select Committee hearing on Tuesday 5 July 2022. I am delighted to welcome the Secretary of State here this afternoon, along with Vice Admiral Sir Chris Gardner, who is director general (ships), defence equipment and support, Rear Admiral Paul Marshall, who is director of Navy acquisition and senior responsible owner for the Type 31 and the fleet solid support, and, finally, Rear Admiral Rex Cox, who is the chief executive officer of the National Shipbuilding Office. You are all welcome this afternoon. Thank you very much indeed.
We will be focusing primarily on the national shipbuilding strategy, and then, towards the end, we will ask about some of the wider issues, as has been agreed.
Q41 Dave Doogan: Good afternoon, gentlemen. Secretary of State, the role of devolved nations, and particularly Scotland, in supporting shipbuilding and the shipbuilding strategy is key, and we can see the evidence of this in the effort, expenditure and value-add of organisations such as the FE colleges, University of Strathclyde, Skills Development Scotland, Scottish Enterprise, Glasgow City Council and Fife Council in particular. What environment and landscape does the MoD create to allow devolved nations to input to that process, to add value to shipbuilding and to make sure that we continue to build the very best warships that we can?
Ben Wallace: The very first contribution that we make is the same that we make to all the nations of the United Kingdom, which is to be, effectively, a customer to encourage investment in yards and in skills, because we are the ones buying many of the ships. That is the first thing. I would say this, because I am a Unionist: you get a bigger customer because you are part of a bigger union, and so that is one of the ways.
However, on the other stuff around skills, we have involved the Scottish Government on part of the skills workforce that we have set up, which is one of the committees where we are very keen to make sure that the skills base is stimulated, because it is really important that the skills are there. More than taxation, the thing that companies move very quickly for is skills. If they cannot get the skills, like oxygen, they will just dry up and that will be the end of that. Customers, whether private or public sector, will move rapidly, so that is very important.
Also, we have the National Shipbuilding Office, and I am very happy if Admiral Cox wants to speak to that and the role that he has in involving the Scottish Government. We discussed this morning about both we have drafted on—the new head of the Ferguson shipyard is involved in the strategy and, indeed, the work that we do with some of the devolved Administrations. If Admiral Cox wants to expand on that, I would be delighted.
Rear Admiral Cox: Certainly. The head of Ferguson is a member of the shipbuilding enterprise for growth. Ferguson is a nationalised yard, so we have really good input there. Fundamentally, the strategy is for the whole of the United Kingdom. There are specific elements for Scotland and the other devolved Administrations, but it is a strategy for the whole of the United Kingdom. Scotland plays a significant part with the west coast and east coast shipbuilding enterprise.
On skills, the Department for Education has launched the UK shipbuilding skills taskforce, which is chaired by Dr Paul Little, who is the chair of the University of Strathclyde.[1] There is a really good input from Scotland.
Ben Wallace: There is another thing that is in the pipeline. The role that I have as shipbuilding tsar and that our shipbuilding office has is to help other Departments and Administrations to find their way through procuring vessels, which they do not routinely do. If you think about the Ministry of Defence, we nearly always have a submarine or a ship in the pipeline. We are always building ships. Some would say that we should build more than others, but we are always doing it, so we have a residual knowledge base. For some Departments, such as the Home Office, which only occasionally replaces its Border Force, or the Scottish Government, with its fisheries protection vessels and, indeed, its ferries, it is not a constant.
The idea of the National Shipbuilding Office and me as the tsar is that we are there to try to help facilitate those procurements when they happen. There is definitely a sense here that we are here to help. With one other Government Department, I am very keen to encourage British manufacturing, British supply chains, British build and British investment in yards. Therefore, we can often help them to find a way of doing that, if they are not used to it. What I would press on the Scottish Government is that you have some ships coming up. You can build them. There are many ways of trying to get them built, or partly built, or supply chain into those yards in Scotland.
Come and ask us, and we will try to help you do that. As you know from the political rows that happen both in the Scottish Parliament and elsewhere, it is too late after the event to say, “We wanted to build it in Scotland but had to build it in Romania”. It is too late after the event. We are genuinely in the spirit of collaboration. What is good for Scottish shipbuilding is good for British shipbuilding, and I would be delighted to continue to make sure that we try to deliver that.
Q42 Dave Doogan: In terms of specifications, I do not want you to go into FSS in detail, because that will come later on. In terms of specifying in terms of a tender for what we need, operations and operational requirements dictate what the vessel or any other piece of equipment can do in terms of its performance. What procedures do you have to ensure that the specification required of any vessel is consistent with the capability that exists in Scottish yards, or yards elsewhere in these islands?
Ben Wallace: I can ask both Admiral Chris and Admiral Rex to expand, but, fundamentally, when the bidders respond to a tender, they have to demonstrate that they have the capacity or the capability to build or respond to that tender, otherwise you end up placing a contract with someone who cannot deliver and we all end up with messes that we have sometimes seen in the past. They have to demonstrate that they have a track record and the technical requirements that will meet it. That is the start point of the process and it is why getting investment in yards is really important.
The public sector, whether it is devolved or UK Government, is a big player in placing contracts. We should be insisting on what you get in exchange for that from those yards. What are the yards going to invest in the skill base in exchange for that? What are the yards going to invest in machinery? It is very telling when you go to a yard abroad—in some cases entirely private yards—how much investment has gone into the machinery and the capabilities that allow them to compete.
Q43 Dave Doogan: Let me just gently push back on that. I hear what you are saying—as the client, you hold the whip hand, and that is kind of the case, but it is a mutual dependency. The UK does not want to be without shipyards, and shipyards need orders to come from the UK and other customers, so it is a mutual dependency. The question that I am trying to get it as how we ensure that we do not specify an element that is a “nice to have” but not essential to the mission and which, in so doing, precludes it from being satisfied from a yard on these islands.
Ben Wallace: There is never one single factor that breaks the camel’s back. It is fundamentally whether they can deliver something on time and on budget. Whatever your politics are, you want to manage a public procurement process that comes in on budget—that is just the reality of it. You have an obligation in Scotland to your taxpayers, the same as I do—and on time, because otherwise the Navy does not get a ship that it needs to meet the threat.
Under all Governments, there are key targets. It is the least that we can expect. You will no doubt criticise me about a delay to a Type 26 programme sometime in this sitting, because we all know that—
Mr Francois Yes, I have that one.
Ben Wallace: Those are two key targets. The second one is security of supply chain. It is incredibly important to make sure that we are not overdependent on another country, should a war happen. The skills base is really important to helping it compete. It is a mixture of long-term funding and security, but I cannot avoid the fact that, on a number of occasions, the Scottish Government had a chance to place orders in Scottish yards but went to Romania.
Q44 Dave Doogan: The Scottish Government is not here giving evidence. It is the UK Government that are here giving evidence.
Ben Wallace: But you are in control of the same levers as I am, like skills base, investment in yards and capital grants.
Dave Doogan: I do not want to get into a constitutional debate.
Ben Wallace: No, I bet you do not.
Q45 Dave Doogan: The Scottish Government is not in control of the same levers that you are, and that is my question.
Ben Wallace: Here is the thing. If you think that is the case, you are wrong. You need to understand what goes into making a shipyard viable. It is things like skills, capital investment in equipment and making sure you have a ready workforce and good management. All of that is in the gift of the Scottish Government, in the same way that some of it is in the gift of my Government. If you do not have the skill base, you cannot build your ships. When I last looked, that is devolved. It certainly was when I was in the Scottish Parliament.
Q46 Dave Doogan: To get back to my original point, would you like to amend—
Ben Wallace: It is called the national shipbuilding strategy. I am here to talk about the national shipbuilding strategy. That means both devolved and reserved, thank you very much.
Q47 Dave Doogan: In terms of the impact and value-add that the Scottish Government have in making sure that the skills are available in Scotland to provide that technical expertise and labour for the production of warships for the UK, that is a very positive thing, is it not?
Ben Wallace: It is a positive thing, if the skills are delivered, not in the management, as we can tell from Ferguson and the management of your ferries, which did damage the reputation of Scottish shipbuilding.
Q48 Gavin Robinson: Rear Admiral Cox, I was pleased to hear you talk of the National Shipbuilding Office being representative of the entirety of the United Kingdom. How are we getting on in Northern Ireland?
Rear Admiral Cox: We have reached out to the Northern Ireland Government and to officials. We have Harland & Wolff in your constituency—a great shipyard under new management and looking to do great things going into the future. Baroness Goldie, representing devolved issues within the Ministry of Defence, has been in contact with Members of the Assembly to bring them up to speed and to discuss the strategy with them. We have a relationship. I would be very keen to strengthen that relationship and we will continue to do that.
Q49 Gavin Robinson: I do not want to put you on the spot, Secretary of State, and I have walked this path for quite a while with your predecessors as well. I was reminding Committee colleagues that I found it quite frustrating when a predecessor, Sir Michael Fallon, came to Northern Ireland and stood in the shipyard in my city to name a ship after my city, which was going to be built in Glasgow. That has been a frustrating path to tread. The national shipbuilding strategy was written by Sir John Parker[2] to try to encourage economic diversion across the United Kingdom, and this modular approach was going to see a re-energising around yards outside of Scotland and outside of the south of England. Aside from warm words and engagement with the Northern Ireland Executive or with Members of the Legislative Assembly in Northern Ireland, what pipeline do we have for Northern Ireland yards to ensure that this national shipbuilding strategy is delivering on its core aims?
Ben Wallace: First of all, the Northern Ireland Executive alone has four, and potentially five or six, ships starting in 2022-23 within its powers. What Admiral Cox is saying, and what my point is about the National Shipbuilding Office, is that we are to help. I am not going to overrule the devolution settlement, but if they want help to try to find a way of building those ships in a Northern Irish yard, or to make it feasible to do so, they should come and engage with us. As you say, we want more than warm words. They have the budget, and let us see what we can do on it.
The plus side for your industry in Northern Ireland is that Harland & Wolff is now joined with Appledore and Methil, which is good news, because that consolidation into a bigger group gives it all sorts of capacity to share work around that conglomerate of yards, which is in the right direction. I noticed very recently one refurbishment of a big cruise ship that came in on budget and under time, which has to be a good thing for the reputation of the Belfast yard.
On Navy contracts, subject to the completions that are going on, Harland & Wolff are active and bidding in a number of contracts there, not just in the Navy but in a number of other contracts. I am very happy, without fear or favour, to help make sure that, if they are successful, these things come back to Northern Ireland or anywhere else. Harland & Wolff’s changes have been really positive just from outside looking in. I went to visit Appledore recently. It is in a good place to be winning both private and public contracts. The investment that the chief executive has now started to make in the skill base in Northern Ireland is very welcome. As you will know, one of the worries early on was that it had a big dry dock, but the skill base had dissipated. It has come back, which has been really good.
Q50 Pete Wishart: Good afternoon, gentlemen. It is good to see you again, Secretary of State. Who knows what could become of Members of the Scottish Parliament in their future political career, but it is good to see you.
Ben Wallace: It is all downhill after that.
Q51 Pete Wishart: Could I thank you, Chair, for the very kind invitation to come along this afternoon? The Secretary of State will know, of course, of our very keen interest in shipbuilding in Scotland. This is the second of our current range of inquiries. On Monday and Tuesday, we will be visiting Govan and Rosyth for ourselves, just to see, first hand, how progress is being made on the Type 26s and Type 31s.
I hope that I am not going to get as tetchy an exchange as you did with Mr Doogan. I want to be positive and helpful, because we are in a good place just now in Scotland. We are all encouraged by the drumbeat of orders. There is confidence in the yards. There seems to be security of employment going forward. Secretary of State, shipbuilding in Scotland seems to be characterised by a process of feast and famine. We have been through the bad times and are currently going through the good times, which is great for the skills that Mr Doogan outlined in his question to you. How do we assure and have certainty that that drumbeat will keep beating and that jobs will be protected and maintained in Scotland?
Ben Wallace: One of the ways is a consistently above real-terms defence budget. We heard the announcement at NATO of a defence budget that is committed and not falling but growing over a period of time, which is one of the ways, because it is absolutely the case that I want to continue building, not feast or famine. It is also why the onus is often on me and the Department to make sure that we come in on budget, which is why the budget point is really important.
If the Type 26, for example, went really over budget, history shows that you end up with fewer ships; instead of nine, you get six or whatever. That means that I often have quite tough conversations with the two men left and right, because I want them to make decisions. I had a discussion yesterday about the weapons fit on the Type 26, because every time you do not make a decision, we all know that the cost goes up. First of all, there is a strong defence budget.
Secondly, it is publishing, which we did for the first time, a 30-year pipeline. That is a really good document. It is not a free lunch. Some of these Departments are buying small vessels once every few years or decades, and our shipbuilding office is there to help them with how to do that. It gives some sense of the British Government and devolved Administrations’ shopping list. If you are an investor in the City or in industry, you can finally get a sense of the scale of it, which is 150 ships in 30 years, and that is a good start point.
The other bit is how we make sure that we prepare the yards for the day that there is not always a Navy contract. I have to commend the chief executive of Babcock. I used to meet members of British shipbuilding who did not really want to talk about it. They would not tell everyone in the City that one of the things that they did was build ships. They would rather talk about their other engineering businesses. He has been brilliant at saying, “No, I am a shipbuilder. Babcock is leading in shipbuilding”. They have won contracts in Indonesia, Qatar, Oman and the UK. That atmosphere that you talk about is partly driven from the top about a belief and an ambition, and we can all have a role in that. That helps unlock investors and do that.
We should not be left behind. That is the other thing. Compared to other European yards—and I do not mean state-owned yards, but just other European yards—we have not been keeping pace over the last 30 years, for lots of reasons. Some might be feast and famine, some might be that the owners have not invested, and some might have been productivity challenges. Sir John Parker and this iteration is a really positive step.
There are cultural issues around FE colleges and skills, which we really have to cross. In some parts of our country, it is really positive. If you are a west of Scotland or Lancashire MP, apprenticeships and FE colleges are embraced. They are part of the fabric and the culture of what we get. It is how we recruit people and how we grow it. In other parts of the country, there is still a snobbery around FE colleges and apprenticeships that does not help in the very important skills that we need. It is palpable. In parts of Scotland, it is embraced, and, in other parts, just like parts of England, it is not. That is some of the work that we all need to do
Q52 Pete Wishart: I am grateful for that. I am not entirely sure about the characterisation of the FE offer in Scotland. I know personally just how good and superb that is, and the assistance that it gives. I understand all of that. I like the document and the refresh strategy. They are very helpful and outline a way forward, but could I suggest maybe two things—one that could have been done and one that you could maybe assure me of as we go forward?
First, would it not have been better not to have split the Type 26 contracts, and that we got all eight ships at once? Would that not have given better security and confidence to the contractor? Secondly, could you see something positive about the delivery of the Type 32s and Type 83s—that they will be built in the UK and, if they are built in the UK, that the yards in Scotland will have first look in for the construction of these vessels?
Ben Wallace: The yards of the United Kingdom will be able to respond to the social value weighting in our contracts, which recognises things like levelling up and economic disparity, etc. My father was brought up in sight of the yards in Fife, so I understand.
Pete Wishart: I am from West Fife and my father worked at Rosyth. We have that common background.
Ben Wallace: You and I are probably the only East Fife supporters left, although my father is in Leven. It is an important document. I could ask Chris Gardner to explain why they split the original contract for the Type 26. Again, as the Secretary of State, we have to also guard against complacency, so that people do not get the single contract and then just sit back and let an overrun or an overcost happen. We do want, even within British yards, some sense of competition to make sure—and it is not lost on me that some of the excellent progress in Rosyth on the Type 31 already is slightly driven by a sense of competition with the Clyde shipyards about who can invest, who can modernise and who can deliver on target to set them up for the next set of contracts. There is no harm in that and that is a good thing.
I went to see the cut steel on the Type 31 in Rosyth. As you say, if the Scottish Committee and, indeed, this Committee go to visit some shipyards, it is really fascinating, when you go to enough of them, how every single one has a different culture and attitude, which absolutely can make the difference.
Q53 Pete Wishart: Any reassurance that the Type 32s and Type 83s will be—
Ben Wallace: They are way into the mid-2030s, if you and I are still around at that stage. They are definitely a key part of the Navy’s war fight and the need to have them. We are talking about 2030s, but we will need to start the process towards the end of the 2020s.
Q54 Pete Wishart: I would like to hear the drumbeat in the future.
Ben Wallace: The drumbeat is there. It is in the pipeline. We will need to replace the Type 45s and the other ships that are currently floating around, and so far, so good, Type 26 and Type 31. If Rosyth is churning out as it is, that is all good omens.
Vice Admiral Sir Chris Gardner: The only thing I would add is that, if we had ordered all eight ships straightaway, we would not have got as keen a price as we are going to get on batch two. Building a new ship that has never been built before, when the level of risk, complexity and engineering is not well understood, means that the company would, understandably, price in a significant margin for that. What we have now, of course, is the evidence, good and bad, about how well the batch one programme is doing, and we have used that as part of our negotiations on batch two.
Pete Wishart: Thank you. I look forward, Secretary of State, to you coming to our Committee in the next few months.
Q55 John Spellar: Secretary of State, you have referenced a couple of times the work being done in support of other Departments, and yet, as our colleague the right honourable Member for North Durham has been raising several times, for the Border Force vessels, they bypassed British yards and went straight to a Dutch provider. Was that helpful to British shipbuilding?
Ben Wallace: I do not think that any contract has been placed yet, has it?
Rear Admiral Cox: For the record, I can categorically state that that is not the case. The Senior Responsible Owner (SRO) joined on 1 June, taking over from the interim SRO, and is reviewing the programme and examining the procurement strategy. I can categorically reassure the Committee that that is not the case.
Q56 Richard Drax: Secretary of State and gentlemen, good afternoon. It is always a pleasure to see members of the Royal Navy. As my father and grandfather continually reminded me, you are members of the senior service. As a former guards officer, we did not quite rate that highly. Anyway, it is very nice to see you all.
Can I read the question and then perhaps just raise a couple of points that I have from the information that I have had that perhaps the Secretary of State and others can comment on? The work in the pipeline is concentrated in the early decades. What are you doing to flatten out these peaks and troughs?
I am tempted to go down the fleet solid support ships, but that is the next question, so I will not, other than to say that it is seen by the shipbuilding industry as the block on which they would like to build further. On my specific question, can I just mention, for example, Francis Tusa, a very respected commentator who I am sure you are all aware of? He says that there is insufficient yard space and skills for the first decade, and insufficient work for the latter two. Perhaps you could comment on that.
There is a concern that, if you give state aid to foreign yards in order to dump prices, that might play a role in shipbuilding going abroad. Several people have commented that there are no guarantees that all vessels, despite the fact that there are many in the pipeline, will be built in the UK. Secretary of State, you have already hinted that it might be the case that not all are guaranteed, depending on the size of the yard, the ability of it to do the work and, of course, the skills that are so important.
The final point is on exports. As we know, some of our vessels will be exported. The view there is that that will help with the peaks and troughs. Where do you see that fitting in?
Ben Wallace: On the peaks and troughs, on the Navy pipeline, depending on the guarantees of the budgets and the long-term future, the Type 31s, Type 32s and Type 83s, and the replacement of Albion and Bulwark—the amphibious assault ships—towards the end of the decade, are all a pipeline that goes well into the 2030s as well, so both decades are fairly well catered for in the purely Navy space. Admiral Rex could probably talk about whether he agrees with the peaks and troughs in that thing.
I am glad that you brought out the issue about yard space, because it is not always the case that you choose not to build or construct or part-build abroad because you do not want to do it in a British yard, but sometimes because, at that moment in time, either the British yards have not bid or, indeed, there is no capacity in that yard. For example, Scotstoun and Govan will not have much capacity, if at all, in the next 10 years, because it is building the Type 26. When HMS Glasgow sails up the Clyde, hopefully sooner rather later, she will go to Scotstoun. The second ship is already starting to be constructed. Third, Rosyth does have space at the moment, but it is absolutely the case—and I agree with you—that we are trying to do is stop feast and famine, but it would be a lovely problem to have that all the yards are full for a very long time.
The second part of that is the skills question. If I could ask Admiral Cox on the skills thing, it is a really good piece of work that we are doing. It was really telling when I went to the south-west of England. There are 19,000 jobs in the maritime industry in the south-west, ranging from Sunseeker and Princess Yachts all the way through to A&P yards in Falmouth, Pendennis and Appledore. There are huge amounts of people in the whole industry, from building a metal box to carpets and furniture for superyachts and all of those sorts of things. It is really good industry.
My point about the FE colleges was that one of their challenges is getting into schools to persuade people that there is a great career in shipbuilding or the maritime industry, let us call it, and some schools being less keen to allow FE colleges to come and advertise their wares, and much keener to divert them to higher education somewhere else, not always necessarily helpful to our industry, but also not necessarily the right thing. That is a really interesting thing.
Rear Admiral Cox: That is exactly what we need to get after and exactly what the United Kingdom shipbuilding skills taskforce is designed to get after. It meets this week for the first time. It has 18 months to map out what the problem is and to come up with some recommendations.
This is not about ditching everything that is going on at the moment, because there is so much really good work on apprenticeships and skills going around across the country by the main primes, for example. We have over 800 apprentices and graduates being employed by the shipbuilding industry at the moment, and that is growing year by year, but we need to make sure that is co-ordinated, because what is right for one part of the country may not be right for the rest of United Kingdom. We need to understand the problem and then make recommendations. We should be under no illusions here. We are not going to solve this overnight, but we must set the conditions now, as soon as we can, to begin to address the problem.
Q57 Richard Drax: Admiral, if we are going to build all these ships in the UK, would that be possible, for example, by expanding port facilities and getting all the skills? Is it your long-term ambition to try to have a shipbuilding industry in this country that caters for everything, or is that an unachievable aim? Are trying to get 75%? Is there a target that you are trying to achieve? Is it realistic that you can get anywhere near?
Rear Admiral Cox: As the Secretary of State mentioned, the national shipbuilding strategy refresh sets out a 30-year pipeline of work. Together with commercial opportunities, that gives British yards every opportunity to compete on a like-for-like basis, but this is also about increasing productivity and investment in the yards, not just in skills but in the infrastructure. Procurement contracts are written in order to try to facilitate and encourage that.
The point that I make to everyone who I talk to about the strategy is that this is a whole-of-enterprise approach. This is Government, the NSO, the Royal Navy and industry. We are all in this together and we have a moment in time where we can change this, and we really need to grasp that. I am very optimistic.
Q58 Richard Drax: What about foreign yards dumping prices? Is it going to be tempting, if money is short, to maybe send one or two ships over to wherever it may be?
Rear Admiral Cox: We need to combat that, and the way that we do that is through the UK home shipbuilding credit guarantee scheme, which incentivises owners and operators to build in the United Kingdom, and we are looking forward to announcing that very shortly. That will be a real fillip for the enterprise.
Ben Wallace: Richard, you talk about exports, so part of the paraphernalia that we have put in place is the maritime capability campaign office to try to win exports. This is the balance. I know that colleagues are often keen on the total UK build model. We are trying to develop a shipbuilding industry that exports, as it does. That is important. We are in competitions in Poland and in Greece. We have sold the Type 31 design and more than that to Indonesia, which is building two ships to begin with from that. The Type 26 in Canada and Australia is one of the biggest shipbuilding products.
All of that is partly because we are an open economy. If we shut the doors, do not be surprised if there is a reciprocal response. All shipbuilding industries need to maintain some form of export market. That is just really important to do. There will be more competitions coming up. Norway’s anti-submarine-type frigate will be coming up, and so we need to be in that business.
What really struck me, going around all those different yards, is how some are ready for the future and some are not. What we have done, which is really good, through the shipbuilding enterprise for growth is to start a programme called Shipyard of the Future. I am conscious that in Europe there are some totally privately owned companies. You see superyacht after superyacht being churned out of German and Dutch yards. There is no state dumping there. I went to one yard—I will not mention which one it was—and I said to them, “What would I expect if I walked into the German yard? What would it look like? What is the difference? What is the difference in machinery?”
We have started a programme, Shipyard of the Future, which will set out what we think and would, hopefully, sometimes when placing a Navy contract, expect the yard to invest in—“If you want our contract for £2 billion worth of ships, we expect you to invest in these things that your competitors have and you do not have”, and make the management work a bit harder for the long-term future of their yard as well.
We have a productivity challenge. That is a fact. We also had a competitive problem, some of which we have changed by those export credit guarantees in home. We did a productivity study, and one of the things that our competitors had in Europe was access to export finance and domestic export home finance. We have done both of those, which is why we have now seen a number of foreign yards buying or investing in British yards. I think that Damen has invested in a site on the Isle of Wight? Have they done that yet? It is not done yet. It is OCEA France, sorry. Foreign yards are looking at now investing in Britain in the infrastructure of British yards in order to either potentially win contracts or because they see a capacity opportunity. It is looking positive.
People were definitely discouraged from building ships in British yards through the lack of a home guarantee scheme for the financing. It seemed to me odd that you could get some infrastructure support, but, when it came to a ship, you could not, so we have fixed that as well, and I am really looking forward to that.
Q59 Dave Doogan: I just have two very quick points, Secretary of State. One is on a point that you were making just a second about the productivity that you see exhibited in foreign yards. Babcock producing 31 at £250 million a unit for the floating moving vessel, ex of GFE, is an extraordinary price. Is it your understanding that is being achieved because of the investments that it has made in Rosyth and the world-leading advanced manufacturing facility that it has there?
I hear what you are saying about capacity. Are you aware fully of BAE’s exceptional ambition for the build hall at Govan and the effect that will have on its available capacity?
Ben Wallace: Going back to my point about Rosyth and the Clyde, the Babcock leadership came along, invested in the build hall, got on with it and said, “If we can build these ships inside, we can increase our productivity. We do not have to stop when it is bad weather and everything else”. BAE, which is now doing it, first of all wanted us to pay for it. To my point about getting the management to invest in the yards, it is in their interest, as much as it is in the customer’s. I am delighted that BAE is going to put a covered build hall in place. We will be contributing to it as the MoD and the customer, but that is the sort of thing that is about the cultural shift and investing in the yard, so that when, whatever happens one day—there is not a naval contract or it wins another contract to build a civil ship—it can show that productivity.
When I went to Pendennis yard recently down in Falmouth, it was awarded a regional development grant, which it immediately spent on a new lift. In doing so, it probably saved itself a lot of money and cut production by six weeks. Because it is an entirely private yard, it knew that its superyacht customers, who are basically its customers, will go somewhere else at the drop of a hat if you do not deliver on time. There is a really pressing demand.
Investing in the yard and its capital really can make a difference. Some companies are up for that, some have to be prompted and some do not do it at all. As an enterprise, we have to really be quite direct about it.
Q60 John Spellar: Just following that, when we were at the BAE yard in Adelaide, that covered facility has been built with very considerable investment from both the South Australian and the Federal Commonwealth Government of Australia. What you are saying, Secretary of State, is welcome, but, for a long while, Treasury has just insisted on everybody going on the lowest price, as long as they can meet quality. That has put British yards at a disadvantage, which brings us on to the fleet solid support vessels, which, as you know, are huge ships. The award of the contract for those has been pushed back for years, and industry has told us that it sees this order as a litmus test for the credibility of the shipbuilding strategy. What reassurance can you give us and them that this order will go to a UK yard?
Ben Wallace: First of all, John, you will know that it is in the middle of a competition. I do not want to be sued if I pre-empt the result of the tendering process. I cannot give you certain guarantees in the middle of this process. What I can say is that the reason it was delayed last time was the competition collapsed. It collapsed because a number of yards pulled out of the bidding and, therefore, it became an untenable competition. We thought we would recast the competition, which was the right thing to do.
I would hope, John, that you would also support the fact that, when anyone is bidding, whether it is a British or a foreign yard, they bid at price. It is not just a blank chequebook. No Secretary of State, Labour or Conservative, is going to sit here and do blank chequebook contracts. If we say, “Here is the contract for a group or a class of ships”, there is a contract put out to price, and that is part of the process. I hope that people agree with that. You just cannot do it any other way.
Q61 John Spellar: Is it only on price?
Ben Wallace: No, it is not only price, which is why we have social value in there. It is a minimum of 20%.[3] The social value includes a whole number of factors, but those that are most important to me are the factors of economic disparity and, indeed, social, economic and levelling up factors that allow us to put a weighting into those contracts, where the bidders must answer some of those, and it is really important that they do.
Q62 John Spellar: Would you let us know the breakdown of that 20%?
Ben Wallace: We will write in, but I can tell you that all bidders have to meet that in that price.
On the solid support ship, it is, of course, incredibly important. We have already insisted that the ship is constructed or integrated in the UK. That is important. We have also talked about the supply chain, the build of the ship and the proportion of the build. I do not know if it is a percentage or just a build proportion that has to be in the UK. We are very keen to make sure that we get a competition.
What I am keen to do in our British shipbuilding is to do the same thing that we had with Nissan and Honda. Nissan and Honda brought their skills, their management and their modern methods into UK car manufacturing and basically saved the car industry in the 1980s. No one has looked back on that. The Sunderland car factory is the most productive car factory in Europe, if I am not mistaken, so we need to sometimes access the winning formula that some of the other yards have had, and that is important.
We cannot rely purely on the permanent. As I talked about earlier, I want to access leverage on skills, on productivity and on investment and capital investment in yards. It is really important to make sure that we produce the best yards in the world, and I think we can do that, but if we pull up the drawbridge, I do not think that we will get there, because we have pulled up the drawbridge for the last 50 years, John, and our productivity is well behind European yards in both cost and time, which is why we are not winning enough private contracts.
Q63 John Spellar: Partly also because of feast and famine.
Ben Wallace: There are plenty of private yards in Europe that are not based on public contracts and that still winning more bids than we are, and that is not satisfactory.
Q64 John Spellar: They get Government subsidy in many cases.
Ben Wallace: Not all of them.
Q65 John Spellar: You talked about integrating. I could say, “I integrate my piece of IKEA furniture by just putting a few bolts in”. When you say “integrated”, how many of the blocks that are going to be integrated are going to be built in British yards, or will they all be built in foreign yards and then welded together in a yard in this country?
Ben Wallace: As you know, I worked aerospace, John, so you will understand that there are lots of ways in which a contract is valuable. In terms of Govan and Scotstoun, probably the most valuable part of the contract for the Type 26 is Scotstoun, where we put on radars, sensors, steering gears and engines. Britain sometimes leads the world in things other than just the metal box. It leads the world in the integration, the weapon systems and the electronic warfare.
Q66 John Spellar: We are talking about a support ship that will have some of that but not primarily. Will those blocks for those ships be built in British yards, or will they be built in foreign yards and just welded together?
Ben Wallace: I will ask Admiral Cox to tell you, to the extent that we can in the middle of a competition which we are in, but when the competition is decided, we can answer many of those questions for you. Fundamentally, the majority of that ship project, whether it is build, integration or supply chain, will be UK. How much—100%, 60% or 70%? We will see what the bidders are putting in, but it is important, as I have said earlier, that we are trying to access both export markets and productivity investment into yards.
For example, if a British bid said, “I would like your contract, but I am not going to invest in the capital of the yard”, and a foreign bid said, “We will invest in some of your British yards, but some of the build will be in our country”, which would you accept—the one that does not want to put any investment in machinery and capital, or the one that does want to improve the yard at the same time? Which would you accept, John? That is often the choices that I have. Which would you accept?
Q67 John Spellar: Not necessarily, because if you had not brought in the foreign yards, you could have had, as you know, a NAPNOC negotiation—
Ben Wallace: You could answer my question, John.
Q68 John Spellar: You could have a NAPNOC negotiation. I am very happy to change roles. I would be quite happy to go back anytime you want.
Ben Wallace: You had my role once, John. I did not see a shipbuilding pipeline under your role.
Q69 John Spellar: Essentially, it is about what the industry, both the workforce and the companies, are looking for. You talk about exports. One of the key questions, if you are trying to export, is that, if you are not good enough for the Royal Navy, the British Army or the Royal Air Force, you are not good enough for us, and that is absolutely right. One of the bestselling points is that you are good enough for the Royal Navy. Industry, this Committee and the workforce do not understand this prejudice against British yards, which no other major naval power undertakes. France and Italy are giving orders, and we used to have loads of excuses about EU regulations. Now, we are told it is WTO regulations. It is garbage. The United States is a founder member of the WTO and absolutely ensures that its orders go into its own yards. Why do we not?
Ben Wallace: I am sorry, but there is no prejudice from me or this team against British yards. You can keep repeating it and, in doing so, by the way, you will undermine British yards, because there is no prejudice against British yards. We are also trying to produce the best Navy that we can in the world, to give our people the best ships and the capability. We are trying to do it on time and on budget, which is incredibly important. We are trying to make sure that, at the same time that we do that, we improve productivity. Under the old system, they just got a cheque and it did not improve productivity, it did not improve the skill base and we had all sorts of other problems.
Q70 Mr Francois Secretary of State, we will come on to productivity when we get to Type 26. Just with regard to the fleet solid ship, these are crucial to fully exploiting the capability of the carrier strike group, as we all know. Can you confirm the intention is still to procure three rather than two?
Ben Wallace: That is right.
Q71 Mr Francois Secondly, if you look at Type 31, the Department set quite a tight indicative cost of a £250 million per vessel, and it is broadly accepted that that worked well in terms of limiting the cost of the ships, which, indeed, have then gone on to win further exports, for instance, in Poland. Have you set, as it were, a firm indicative limit for the cost of the fleet solid support ships à la the Type 31?
Vice Admiral Sir Chris Gardner: The answer to that question is that we have given the bidders the cost envelope in which we are expecting them to be able to deliver three ships against the requirement that we have set.
Q72 Mr Francois You made the cost envelope for Type 31 very public, deliberately. Are you planning to do the same for FSS and, if not, why not?
Rear Admiral Marshall: It is in the public domain. The contract price will be £1.617 billion.
Mr Francois A maximum of.
Rear Admiral Marshall: That is the contract price.
Ben Wallace: We have given inflation relief.
Chair: This is for all three vessels.
Q73 Mr Francois That is based on three, not two.
Ben Wallace: That is three, and we have given inflation relief. In other words, since it started, inflation has gone up, so we have put into that an inflation relief—
Q74 Mr Francois Lastly, just quickly, before I hand back, is there any slippage in the IOC? If not, what is the IOC for each of the three vessels?
Rear Admiral Marshall: We have put a high premium on incentivising the delivery of the first ship in 2028 to meet our out of service date for Fort Victoria, with a contract target of delivering all three ships by 2032.[4]
Mr Francois So 2028, twenty-whatever and then 2032.
Q75 Chair: The reason why we are raising this is because it has been around for a long time. This is not the first time that we have raised this with you, Secretary of State. I know that you said that the competition was not running well, which is why you then started again. I think you also were the Secretary of State—correct me if I am wrong—who dedicated these as warships. Therefore, that obliged the ship to be completed, if nothing else, here in the UK. Is that correct?
Ben Wallace: Yes. In the past, before we refreshed the strategy, there was this thing that, if you called them a warship, you had more freedom of manoeuvre if they were designated not, so I changed that to make sure that it was a warship in order to give us more freedom of manoeuvre in the new competition. Now, we have got rid of that definition and done it on a case by case basis.
John Spellar: It took us a while for us to get that.
Q76 Chair: What we are trying to get to is the pace of decision-making. You are saying that you are still open to competition. When will the decision be made now?
Rear Admiral Marshall: The final bids will be received at the end of July this year.
Q77 Chair: The end of this month, and then the contract will be awarded and then when will the first ceremonial cutting of steel be?
Rear Admiral Marshall: The target to be on contract is quarter 1 next year. We are aiming to go as fast as we can to contract, given the current economic conditions, but we start the evaluation in July.
Q78 Chair: Forgive me; you are starting the evaluation—
Vice Admiral Gardner: We will get the bids in this month, and then we will go through the evaluation process to down-select the final preferred bidder.
Q79 Chair: But you will not make a decision until, did you say, the end of the year?
Rear Admiral Marshall: We are aiming to place the contract by the end of the first quarter next year.
Q80 Chair: Next year—it is the time that is going along. There is a pressure here. Am I right in saying that the Fort Victoria is the single ship that is having to do all the support? Does that not need to go into refit at some point?
Rear Admiral Marshall: We have factored in the run-on costs for Victoria out to 2028 as part of the programme.
Q81 Chair: So you have led the lifetime of the Fort Victoria deliberately to cover this, but this is a single ship, is not it?
Rear Admiral Marshall: It is a single ship, yes, being replaced by three.
Q82 Mr Francois Sorry, Admiral, the Chair’s question was specific. Will she not have to go into refit? Will she be available operationally throughout that time until 2028?
Rear Admiral Marshall: The current plan is that she will remain available out to 2028.
Q83 Mr Francois She has given very loyal service. No disrespect, but she is a pretty old ship already, is she not?
Rear Admiral Marshall: She will require some work, but we can meet the operational outputs with Fort Victoria until 2028.
Chair: So we are going to need a support ship for the support ship.
Q84 Dave Doogan: Just listening to the comparisons with international benchmarks, I may be wrong but I am detecting a lack of credit for the steps that primes have made, being Babcock, in terms of the work that they are doing just now. That is evident in the fact that very serious navies around the world are buying the rights to these ships. Other navies, particularly in the case of the Type 31, were buying the ships built in the UK and in Rosyth. Can you think, Secretary of State, of a time in the past when navies were buying UK warship designs in the way that they are now?
Ben Wallace: No, but if you listened to my evidence, there has been no shortage of praise for Babcock at Rosyth. You characterise it that you are detecting a lack of it. I have congratulated them on the shipbuilding hall, the sense of delivering on time and doing incredibly well with the Type 31, the fact that they won in Indonesia, the design that they are building in—and I think I listed everything, including contracts in Oman. You could not accuse me of that at all.
Q85 Dave Doogan: I did say that I might be wrong, so I am happy that I have given you the opportunity to underline your esteem for Babcock and BAE.
Ben Wallace: If you would like me to get on the record how well Fife and Babcock is doing, it is doing very well and it has great leadership.
Q86 Dave Doogan: We are engaged, of course, in some very challenging conflicts in Europe just now, in Ukraine, and this has had a very significant impact on stock levels of allied nations as they support Ukraine to seek to defend and liberate its country. This has presented significant challenges for skills in restocking. With particular reference to a conflict of that nature, or even more significant a conflict, what if the demand for vessels increased as a result of global tensions, and increased quickly? Given that 31 and 26 are being manufactured in relative, in naval terms, peacetime, and it is already a challenge with skills, what is the plan, if things got very difficult very quickly, to ramp up production of naval warships?
Ben Wallace: Whether it is shipbuilding or complex munitions, I said earlier on that the skills are more important than the tax. It is like oxygen, and I totally agree with you that it is a really important thing to have a plan for, which is why we have already set up—and Admiral Cox can expand on it—a skills forum to see what more we can do. It is why we are seeking investment around the UK on that skill base. BAE has an academy in Barrow-in-Furness, which I have been to visit, for shipbuilding skills. Babcock does a lot on its skills as well. Again in the south-west, a number of apprenticeships are really important for building that.
Rapidly expanding skills is the place that everyone fears. You cannot just grow a very good welder on a tree. You have to invest in them, and they take time, and that is why one of the lessons of Ukraine, whether it is weapons, complex weapons or any type of engineering or technology skills, is that we really have to, as the United Kingdom, invest in those skill bases and to get people wherever we can from school, from FE and from higher education into that area of growth.
I was hearing today about how Amazon, in many parts of the country, has, effectively, sucked up lots and lots of other jobs and caused quite big challenges, because, locally, lots of people are opting for the Amazon massive distribution centre and, in doing so, the battle over scarce young people and resources is greater. That is a challenge for us all in terms of how we are going to encourage people to go into what I would say are the skill bases that really build the difference for the long term—STEM, cyber, IT and engineering skills that are so important. Admiral Cox can expand on the skills work that we have already done.
Rear Admiral Cox: I referred earlier to the skills taskforce, so I will not rehearse that, but I would say that your potentially hypothetical scenario, which I recognise, would require a change in the national effort, which would then require other elements of the industrial base to be focused towards that and prioritise that. To your question of whether we could scale up to match events, yes, but that would be a national effort. As the Secretary of State rightly points out, we need that skills base, and that is what the taskforce is getting after over the next 18 months.
Q87 Dave Doogan: There is a second part to that. I say this against the backdrop of FSS, because some of us find enduring a term of “significant UK content” difficult as opposed to “total UK content”, accepting, of course, that the engines will almost certainly, and the gearboxes might, come from somewhere else. The shipbuilding part of it, many of us believe, should be entirely on these islands. Perhaps if there was already greater synergy between yards in the United Kingdom on these islands, there would not even be a conversation about building blocks abroad and having them welded up together in yards in the UK.
What does the strategy do to facilitate greater synergy between Scottish yards that are centres of excellence for this element of shipbuilding and that element of shipbuilding, blocks and final construction, and all the rest of it? Where is that synergy that defies changes in Government, constitutional changes and whatever threat that we face? Where is that synergy being encouraged?
Rear Admiral Cox: In terms of the shipbuilding enterprise for growth, which I co-chair with the president of the Society of Maritime Industries, Mr John Howie, we are getting after two task and finish groups. One is, as the Secretary of State mentioned earlier, the Shipyard of the Future, and the second is centres of excellence. We are working really closely with industry and many colleagues in Scotland, as well as across the rest of the United Kingdom, to define what those centres of excellence could look like and how they could dovetail with a shipyard of the future to make the shipbuilding enterprise better. I entirely recognise your question and we are absolutely determined to get after that.
Q88 Dave Doogan: Just on that skills element, Secretary of State, when the Committee went to both Scottish yards, we heard evidence from people who work there that, when you take in apprentices, there is a tendency to get the very best candidates that you can—and why would not you do that? Maybe an unintended consequence of that is that people then ping-pong up their career progression, which is great and, if that is what they want to do, that is fine, but it does leave you with a constant cycle of renewal at the skills end on the shopfloor, where you are plating and welding and all the rest of it.
Do we need to have an intelligence-led step change to having a dual stream recruitment process for apprentices, where we have those who are pursuing a career that might go somewhere, and others who are looking for a vocation that might go somewhere but also might stay on the shopfloor for 35 or 40 years?
Ben Wallace: I can tell you only about my experience from Lancashire and my part of the world, where you have BAE Aerospace, and then I live only about an hour and a half from Barrow. Part of that is in the gift of the employer and the regional educational piece. In Lancashire, BAE manages that very well, because it has so many ways into its shopfloor and so many different types of apprenticeships. There is a healthy group of skilled and semi-skilled workers and degree-led apprenticeships in a very healthy way. That is to the credit of BAE rather than any Government or whatever. That is something to reflect on, in one sense, in this inquiry and to ask the employers about that.
I do not disagree. Not everyone can be managers. I suppose it goes back to my point on FE and things like that. A good welder is worth their weight in gold. They are incredibly important. I have seen highly complex pieces of equipment, either for America or made in America, or made in Britain for abroad, or made abroad and brought in here, where one welding mistake can cost tens of millions of pounds in rectifying it. They are worth their weight in gold.
When we talk about the future skill base, one of the challenges is finding the future instructors, never mind the future pupils. We need to make sure that, if we do need to bring in workforce from abroad, we consider whether it is the instructors rather than the mass. I had one defence prime ask me to lobby to bring in a whole load of workforce from abroad at mass, and I said, “No, but I would support you bringing in 10 or 20 instructors or people who could teach our British citizens how to be the welders of the future”.
Vice Admiral Sir Chris Gardner: If I may, you will see that in evidence at Rosyth in terms of the apprentices that Babcock is bringing on to the shopfloor. The truth is that we need both types—those who want a long-term career and see themselves moving up through the company, and those who want to stay on the shopfloor. The point that I would make is that the skill base is changing as well, because the welders who we need for tomorrow are people who are trained on operating robotic welding machines, not doing the welding themselves. That is a fundamental change in the way in which our shipbuilding industry needs to evolve.
Q89 Derek Twigg: Rear Admiral Cox, in answer to Richard Drax’s earlier question, you mentioned 800 apprenticeships.
Rear Admiral Cox: And graduates, yes.
Q90 Derek Twigg: Does that meet the requirement? Is it above or below that requirement at the moment?
Rear Admiral Cox: The answer is that we do not know, and we set up the skills taskforce to get after that answer.
Q91 Derek Twigg: In that case, how do you plan if you do not know? I get the skills taskforce. Why has this not been done before?
Rear Admiral Cox: Work has been done by various primes, but it has not necessarily been coherent or co-ordinated on a national basis. That is what the task force is about. Through its visits, it will be visiting shipyards, the supply chain and FE colleges, and using the experience of the taskforce that has been carefully selected for that experience to map this out.
Q92 Derek Twigg: Do you have any data or information on the retention of apprentices—the young people who go through an apprenticeship and stay, leave and go elsewhere, or even do not complete the apprenticeship? Do you have any figures on that?
Rear Admiral Cox: I do not have that to hand.
Derek Twigg: It would be useful to know.
Rear Admiral Cox: The taskforce will report to the shipbuilding enterprise for growth and upwards to the inter-ministerial group, and so, once it has been analysed, that data will be publicly available.
Q93 Derek Twigg: But at the moment, we do not know what the wastage is in terms of the people who go through an apprenticeship—
Rear Admiral Cox: At the moment, I do not. My colleagues in the Department for Education may have an idea on those numbers.
Q94 Derek Twigg: But this taskforce will get to the bottom of that.
Rear Admiral Cox: Absolutely, and the taskforce is a joint endeavour between the Department for Education and the National Shipbuilding Office to deliver the skills issues identified in the strategy refresh.
Q95 Chair: Just before we move on to the next class of ships, I just wanted to ask about Sir John Parker’s review when he talked about virtual shipyards. This was a concept that was used quite efficiently and impressively with the Queen Elizabeth class, where chunks of this ship were built in different parts of the UK and then all put together up in Scotland. It seems to have been dropped from the shipbuilding strategy. Is that not one method through which we could distribute the work across different shipyards across the country?
Vice Admiral Sir Chris Gardner: One of the things that we are trying not to do is to dictate to the bidders how to build the ship. It is for them to come back to us and tell us how they intend to do it, but there is absolutely no reason why they cannot and would not necessarily adopt a distributed build strategy as part and parcel of that. We do not yet know on FSS, for example, what the exact build strategies are going to be for each of the current bidders, but all of those options are open to them.
Q96 Chair: But you seem to have dropped it as something to encourage. I thought that this would be something particularly with the skill sets.
Ben Wallace: It is encouraged in at least two or three different ways. First of all, the construct of the contract. On the future solid support ship, I deliberately chose to change the contracts construct. I separated the design and priming from the yard, because, in the past, it has been an all-or-nothing event, and I took the view that what we want to see is that there is a design/priming contract, and then the winner of that gets to have access to all the yards.
To the point that Richard Drax made about yards being full, the way that we are going to maximise and flatten out the peaks and troughs is that, when we place our contracts, we should not be held to, “You use our yards or nothing”. If, let us say, Company A that owns a yard in the west of Scotland wins, but its yard is full, why should Company A not be free to place the build in another yard that might be a competitor but, nevertheless, is empty? It is a really important way of maximising our productivity and our yard space in the build process, because that was often not how it was done in the past.
Q97 Chair: But I simply flag up that Sir John Parker’s review recommended the virtual shipyard concept and, as a concept, it seems to have been—
Ben Wallace: No one has abandoned that concept. In fact, we have put in place things that will encourage more use of it, so my point about the construct of different contracts. Secondly, there is the issue around investing in the capital in all the yards and in the yard of the future that will allow people to do that. No one has abandoned that sense. Just because it is maybe not explicit, no one has abandoned it. In fact, our actions are louder than just an aspiration. Our actions, by the redesign of our contracts and by trying to encourage an all-of-UK enterprise and social weighting value, are actions rather than aspirations.
Q98 Chair: I hear the actions but the words themselves which—
Ben Wallace: The words in his first one were an aspiration. This is action.
Q99 Chair: But in the document that you just pointed to, those words have been dropped; that is all I was saying. It is a concept that would certainly help the smaller shipyards, because they are the ones that would benefit from it.
Ben Wallace: Yes, absolutely.
Q100 Chair: We have made that point. Can we now move on to, first, HMS Albion, HMS Bulwark and RFA Argus? Can you tell me what is happening to these multirole ships?
Ben Wallace: As you know, one goes in and is having its deep maintenance.
Chair: “Mothballed”, I think, is the term.
Ben Wallace: No.
Q101 Chair: So where is Bulwark right now?
Ben Wallace: One of them has just come out or been on service and she has come back in. The other one came out of deep maintenance last year or the year before when I went to visit her in Falmouth, and she has come out. They are not mothballed. One is on R5[5]—is that right? 180 days’ notice to move, and the other one is on R0 or R1.
Vice Admiral Sir Chris Gardner: We have one of the LPDs currently in service, and the other one is undergoing deep maintenance and upkeep.
Q102 Chair: Deep maintenance and upkeep. We will use that phrase. RFA Argus has been given another lease of life. This is 1970s engineering. Is that right?
Vice Admiral Sir Chris Gardner: She is an old ship. There is absolutely no doubt about that, but we have just extended her in-service life in order to maintain our access to a role 3 medical capability for the foreseeable future.
Chair: It is a superb ship. There is no doubt about it. Many of us have visited it and it is also used for a lot of decking and a lot of the Navy doing its flight training and so forth. It is extremely versatile; there is no doubt about it. Its simplicity and modularity is what gives it such great flexibility. It is curious, though, that it is still kicking around since the 1970s, and it just shows you that perhaps, if you look after these ships, they can last a long time. What caused you to make the decision to then elongate its life again?
Ben Wallace: Maybe I could just talk about the LPDs. As you know, the future commando force is redesigning itself to have a future commando force north and a future commando force south, which will require, effectively, two LPDs. Of the current fleet that we have, there are a range of vessels that could provide that function. Bulwark and Albion are not due to go out of service until roughly 2030 and a bit later, so we have, effectively, a funding stream, which has not started yet, to pay out. We will seek to replace Bulwark and Albion at the end of the decade.
Then you have the Bay class, which, again, have an internal dock. They have a single dock well and a dual dock, but they have the same versatility and are incredibly versatile.
Q103 Chair: Just remind us how many of those you have left?
Ben Wallace: Four.[6] One is almost permanently down in Kipion, which is the minesweeping mothership. We have seen them used in the Caribbean. They provide a support role. They were used as an LPD recently in one of the future commando force operations. They are versatile, and Argus can do a similar thing. They are all landing pads with C2 nodes, and a number of them have internal docks that all fit the use that the Marines would wish to have.
Your question about why Argus is absolutely correct, because, right now, there is a debate within the Navy about what ships should provide the littoral strike group north and south support until we get to the end of the decade when we will be replacing Albion and Bulwark. That is a live, unresolved debate by the Navy. Two years ago, it was of the view that it would convert a Bay class to give it a better capability to store helicopters. That has currently changed and I am expecting a proposal, although it has not been signed off, that RFA Argus may fulfil that function.
As Secretary of State, I am quite pressing on the Navy to settle its mind about what it wants. I am confident that whatever ship they choose—Bay class, Argus or, indeed, Albion or Bulwark—can do the function, but the key here is how they wish to fulfil that. They all have strengths and weaknesses. Argus’s weakness is that it has a massive crew, because it is an old ship. Bulwark and Albion are fantastic, but they again require a big crew, although they have some real strengths. Bay class has a small crew—about 67, if my memory serves me right—but does not necessarily have the hangar space that you might want for helicopters.
They all have strengths and weaknesses. I have asked the Navy to make sure that it settles on an option. Come 2030, we may be working with another country to see if we can share a cycle of design for the next generation.
Q104 Mr Francois: Secretary of State, for many years, the Royal Navy has had a surface escort force of 19 frigates and destroyers. The Type 23 HMS Monmouth retired in the summer of last year, so that takes us down to 18. The Type 23 HMS Montrose will retire in the summer of 2023, so that takes us down to 17. That leaves us something of an escort gap until the Type 31s come in, I believe, in 2027. This Committee has been told that this juggling of escort numbers is akin to alchemy. We regard it as fool’s gold. Why will we next year be down to 17 frigates and destroyers and then have to wait another four years before we go back up.
Ben Wallace: The good news is that we are committed to funding to go above that by whatever it is—2028 or 2030. The Government have committed to funding the replacements and getting online. As you say, there is a dip that clearly takes place in the middle of the decade before we can start generating out.
One of the ways that we sought to solve that—and I do not think it is alchemy—is better availability. While I recognise that you cannot have one hull in two places, you can have a ship more at sea than it used to be, because availability is sometimes just as important as location. We have seen very significant improvements in availability of our ships. Montrose is an interesting example where we forward-based the ship and we are rotating the crews through, which has been better for its availability, because she is no longer spending x number of weeks just going back to the Britain and changing over, etc.
Q105 Mr Francois: But in war, Secretary of State—and it is not fantasy to talk about a general conflagration now. Last week at RUSI, the Chief of the General Staff was talking about mobilising the British Army in order to deter. We might come on to whether the First Sea Lord plans to mobilise the Royal Navy. All your ships need to be available and there is no reserve. The Royal Navy has no war reserve of surface escorts. You have to fight with what you have. As they say in the jargon, you would have to fight tonight. Are you not concerned that we would have fewer ships with which to fight?
Ben Wallace: Let me put it another way. For a very long time, we have not had the availability that we are going to have now. You say that all our ships have been available. All our ships have not been available for decades.
Mr Francois: We know that.
Ben Wallace: If availability is part of the premium, that has gone up, so the number of days at sea. It might be hulls in the water, but they have to be hulls in the water that are available. The stuff that we have been doing in rectifying the Type 45 is a really good example. It is all very well having £6 billion ships on paper; if three or four of them are wrapped in bubble wrap and not going anywhere, it is totally pointless.
Q106 Mr Francois: Secretary of State, not a single ship has come out of PIP. The first Type 45 to go in has been in there for two years.
Ben Wallace: Dauntless is out and she is doing well.
Q107 Mr Francois: Sir, she has not re-joined the fleet. She is still doing trials, so she has been out of action for two years.
Ben Wallace: Most of them have been out of action for 10 years.
Q108 Mr Francois: Secretary of State, is to your credit that you have accelerated PIP from one ship to two, so you are doing them in parallel, but there is still not a lot of point having a £1 billion air defence destroyer tied up alongside. If you drive her too fast in the water, she breaks.
Let us stick with Type 31. We visited Babcock at Rosyth, and then went to Scotstoun at Glasgow, as a Committee. We saw HMS Venturer, the first of class of the Type 31, in the very early stages of build. She comes in in 2027. In the meantime, the Type 23s, which have given loyal service and been the workhorses of the fleet for decades, are very old. The most modern, HMS St Albans, was commissioned 20 years ago. The oldest, HMS Norfolk, was commissioned 32 years ago. These ships are tired and are increasingly expensive to keep in service. How can you be confident that we can continue to maintain their availability when the first replacement, Venturer, does not enter service for another five years?
Vice Admiral Sir Chris Gardner: You are absolutely right, Mr Francois, that the ships are old. They are obsolescent and are suffering from a degraded material state, which is why we are having to spend a significant amount of money on maintaining and extending their lives.
Q109 Mr Francois: You said “obsolescent”.
Vice Admiral Sir Chris Gardner: No, they are suffering from obsolescence.
Q110 Mr Francois: So if we had to fight the Russians next week, would you want to go to war in an obsolescent warship?
Vice Admiral Sir Chris Gardner: I did not say that the ships were obsolescent, but that they are suffering from obsolescence because of the age of the equipment.
Chair: What is the difference?
Mr Francois: That is sophistry.
Q111 Chair: Could you just explain the difference between a ship being obsolescent and the equipment that they use being obsolescent? Surely that makes a ship obsolescent.
Vice Admiral Sir Chris Gardner: My point is that, fundamentally, we can still get the operational outputs that we need out of the platforms as currently configured, but it is the maintenance of those platforms that is suffering from increasing obsolescence challenges, because we just find it harder to source the spare parts for them.
Mr Francois: Yes, and when they go into refit, they take longer and longer to come out. It is analogous to taking an old car to a garage and you have to work harder every year to get it through its MOT. The Secretary of State understands this. That is the problem with Type 23 availability, and there is no war reserve. You have the R&R, but, in terms of warships, there is no war reserve. You can fight only with those ships that you have, and it takes far too long and too many years to build a complex warship. Let us come on to that.
We also went to Scotstoun in Glasgow and visited the Type 26 in construction, HMS Glasgow. Make no mistakes—the design is world-beating, and that is why we sold it to Australia and Canada. She will, when she is in service, be the absolute peer anti-submarine warfare frigate in the world. There is little argument about that, but her IOC has now been delayed again—we got this from BAE Systems—until late 2028, so the gap gets even longer and the Type 23s have to work even harder.
The Japanese have just introduced a new class frigate, the Mogami class, which took three years from lay down to commission. It is taking BAE Systems 11 years to build and commission a warship. Why can the Japanese build a modern, complex worship three and a half times or nearly four times faster than BAE Systems at Glasgow? Who wants to take that one?
Vice Admiral Sir Chris Gardner: I will. It goes back to the points that we have been making about the productive utilisation of the yards in which we are building our ships.
Q112 Mr Francois: Is that a euphemism for saying that they are not very good at building very quickly?
Vice Admiral Sir Chris Gardner: I am saying that there is a need for significant investment in the yards in order to increase the rate of productive utility that we can get out of the yards themselves. You see a world class frigate factory now, having been built in Rosyth on the back of £60 million worth of joint investment in infrastructure and facilities, which is going to be churning out the Type 31 in a decent timeframe.
Q113 Mr Francois: We went to Glasgow. We were shown the old Victorian shed where its new “frigate factory” is going to be built. We have been hearing about this factory for years. We were told that, apparently, it is all held up because it has a unique Victorian roof, and someone in Scotland has objected to that on heritage grounds. I am sure that Vladimir Putin is killing himself laughing. I put it to you again. Why does it take 11 years to build a modern frigate, and why has it slipped by one more year and is now over a decade? You are the man in charge of this, so what is the answer?
Vice Admiral Sir Chris Gardner: In terms of why HMS Glasgow has slipped, there are, fundamentally, three root causes to the problem. The first of those is Covid.
Q114 Mr Francois: Sorry, Covid affected Japan and they still did it in three years. Did the Japanese not get Covid?
Vice Admiral Sir Chris Gardner: I have no idea how they managed the Covid challenge in Japan.
Q115 Mr Francois: They did it somehow and they are knocking out the Maya class, which are their Aegis-capable destroyers, three years, start to finish. Are the Japanese immune from Covid?
Vice Admiral Sir Chris Gardner: I did not say that they were immune from Covid.
Q116 Mr Francois: In terms of that excuse, I am sorry but the Japanese managed to get around it. What are your other two?
Vice Admiral Sir Chris Gardner: The other two were that we had significant challenges over engineering maturity in the Type 26; BAE would acknowledge that fact itself. The other one is that the supply chain performance has not been as good as we would have wished it to be. The consequences of all of that have been the delay to HMS Glasgow by 12 months.
Q117 Mr Francois: But you do accept that, with modern naval warfare, if you had to go to war against the Russians within the next few months, you can go only with what you have, and what we have is tired or has engine problems. These ships are world-beaters, but they are years late, so what are you doing to speed the programme up and recover that year that you have lost?
Vice Admiral Sir Chris Gardner: In terms of HMS Glasgow, we will not recover the time. I will be completely honest about that. What we are doing is we are working with BAE to ensure that we minimise the delay on ship two, and I am holding their feet to the fire to deliver ship three against the original contracted vessel acceptance date.
Ben Wallace: I do not know anything about the Japanese spec for ships. I have no idea what the different ship specification was. Before we compare apples and pears rather than apples and apples, I will write to the Committee saying, if there was a difference, why there is a difference. Some of it is maybe in productivity and production, but some of it may be the Type 26. One of the reasons it has been bought by Australia and Canada is that it is a unique submarine warfare ship with a very unique design that makes it incredibly quiet and, therefore, able to listen. As a first in class of a world-beating new design, they are always going to take longer, because they are always going to be complex.
However, that does not excuse the supply chain problem. I went to visit the supplier, because I was told only at month 20 when this thing was late. I went to visit it to, effectively, read them the riot act about why I thought it was unacceptable, and I said to BAE, the Navy and the subcontractor, “There is too much fragility in this supply chain. It is all a bit late telling me now at month whatever. Do not underestimate that the Canadians and Australians are watching and, if you do not start fixing that, they will be off and you will become an embarrassment to the United Kingdom, and I am not prepared to have that”. We have fixed some of that. We have already shortened that initial delay. Glasgow is going to be, as you say, about 12 months late. However, the overall class of all of them will, I have been told, come in on time.
Q118 Mr Francois: Just quickly, Secretary of State, that depends on them sorting out this issue about the Victorian roof and building the “frigate factory” to catch up on the delay.
Ben Wallace: We are all very happy to talk to the Scottish Government about accelerating that. I know that the Scottish Government and the SNP have been campaigning on the frigate factory, so it is absolutely something that they support. I am sure that, together, we can fix any of those problems, if there are those types of problems, but I can assure you that the issue will be the complexity of the system.
A bit like my thing on the future commando force, I have said to the Navy, “Start making decisions on the Government fixtures, because delay and dither about whether you are going to have this type of missile or that type of missile costs money in the long run”.
Q119 Mr Francois: On that, I have one more question on obsolescence. We produced our report, We’re going to need a bigger Navy, in December, before the Russian invasion of Ukraine. I will just read very quickly from the summary: “When ships do get to sea, they act like porcupines—well defended herbivores with limited offensive capabilities. This is a result of decisions by successive Governments to limit budgets and prioritise defensive capabilities. What offensive capabilities these ships do have will be reduced even further in three years’ time”—this came out last year—“when the Government retires the Harpoon anti-ship missile without a planned replacement. More money must be found to upgrade the Navy’s lethality and allow our ships to take the fight to the enemy”.
If we take out Harpoon, our only surface-to-surface weapon on the ship, not the helicopter, is a 4.5-inch gun, whereas the Russian and Chinese equivalents have missiles that can destroy our surface escorts from very many miles away. What is the plan to replace Harpoon?
Ben Wallace: There is a plan to replace Harpoon. There is an interim plan in between what we might settle on in the long term. I do not know if I can announce the details of that yet, because I am not even sure if it has been put out to a tender1, but there is absolutely a plan to do so, because, like you, I agree there.
Ben Wallace: There is a plan to replace Harpoon. There is an interim plan in between what we might settle on in the long term. I do not know if I can announce the details of that yet, because I am not even sure if it has been put out to an agreement, but there is absolutely a plan to do so, because, like you, I agree there.
Q120 Mr Francois: Secretary of State, the long-term solution is an Anglo-French cruise missile that, at the earliest, would enter service a decade from now. The weapon does not exist. It is a theoretical construct.
Ben Wallace: With all due respect, Mark, that is not the case. The Type 26 will be fitted with a Mark 41 launcher, which gives us access to a whole range of missile systems from around the world, predominantly United States ones, but certainly the requirement on MBDA is to start making missiles that can be fired from that, and that is being fitted to the Type 26 as it is being manufactured.
Q121 Mr Francois: Secretary of State, Type 26 will have the Mark 41, and it is the old story: it is fitted for but not with. It will have the launcher, but we have not decided what goes in it. It is a box.
Ben Wallace: My point is that we have time to decide what goes in it before the first one becomes in service.
Q122 Mr Francois: My point is that the Russians are shelling Mariupol as we speak and we do not have time, so what is the interim weapon and when does that enter service, with respect?
Ben Wallace: I do not know whether it has been contracted2. I am being slightly careful. The Navy has decided on an interim weapon and we have to—
Rear Admiral Marshall: We are in negotiation now, so it would be inappropriate to comment.
Q123 Mr Francois: Lastly, the Chief of the General Staff said very powerfully at RUSI that he is going to mobilise the Army to deter war with Russia. Is there any plan to mobilise the Royal Navy?
Ben Wallace: The Chief of the General Staff’s definition of mobilising the Army is to make it ready and focused on the threat of Russia. It is not mobilising as in we are going to empty the barracks and send everyone out into the field.
Mr Francois: We all know what he meant.
Ben Wallace: Mobilisation is making it ready and relevant. Is there a plan to make the Royal Navy ready and relevant? Yes, absolutely—Type 26, Type 31, investments in the next generation of attack submarines. Have our deployments been absolutely in places that they have not been before since the Cold War? We have been in Barents Sea.
Q124 Mr Francois: In other words, we are going to mobilise in five years.
Ben Wallace: No.
Q125 Mr Francois: You just mentioned the 26 and the 31. They are five or six years away.
Ben Wallace: Yes, but we still have a current surface fleet. Right now, we have an Astute in the Mediterranean and another somewhere else. We have our surface fleet active, working in joint exercises. In the last few months, we have been in the Barents Sea, the Baltic Sea and the North Sea. They are not Type 26s and Type 31s, and I cannot magic them if Russia goes to war with us, but I can absolutely make sure that we have the availability, so that we have as many Type 23s and Type 45s out and active as possible, and that is what is happening right now.
Dave Doogan: I have a point of clarification. My understanding from BAE is that the new build hall is not going to be in that location, so there are no heritage planning issues with the site of its new build hall.
Mr Francois: That is what they told us when we went there.
Chair: They did tell us that.
Mr Francois: We stood in front of it; sorry, we stood inside it.
Dave Doogan: I heard it too and I was there, but things have moved on at the site.
Q126 Chair: It does not take away from the fact, if I may, that we went to Govan and we saw a Type 26—a state of the art frigate, one of the best in the world—being built under canvas and scaffolding. Whether it is Japan or elsewhere, other countries around the world have state of the art hangars inside which these things are then built. Whether it is at Govan or somewhere else, that is what we need. Perhaps that is the starting point when we give out contracts to shipyards, where we say, “Do you have a locality indoors to build these things?” which means that the pace—
Ben Wallace: Tobias, you and I totally agree. What I have been seeking to do with these contracts is to put some form of conditionality. I do not know if you remember, but when Gordon Brown encouraged BAE to take on Scotstoun and Govan—VT or whoever had owned it—one of the deals was that it would get a 15-year work programme and throughput of ships to encourage BAE to take that on. That was part of the deal. The question is that it had at least 15 years and has not built a covered thing.
Chair: We made the point. It was a great visit, and thank you for allowing us to visit.
Q127 Dave Doogan: My supplementary is very brief. Admiral, when a Type 26 finds a submarine in a war environment and seeks to dispatch that submarine as a threat, how does it do that?
Vice Admiral Sir Chris Gardner: It uses either the Merlin helicopter that it has on the back of the ship, or it will cue other assets that can do that, like P-8 Poseidon.
Ben Wallace: Or a sub.
Vice Admiral Sir Chris Gardner: Or another submarine.
Ben Wallace: Or the Mark 41 launcher—my point about having access to a whole range. There is an anti-submarine missile that can be fired up.
Vice Admiral Sir Chris Gardner: An anti-submarine rocket.
Chair: The point that Mark was making is that you have a version of this in the Type 45s, and they are just tubes. We do not put a lot in them at the moment. Moving forward, the Type 26 will be welcome.
Mr Francois: Do not misunderstand us. She is a world-beating ship. That is why we want it sooner rather than later.
Ben Wallace: I am the same. I wanted to be holistic.
Q128 Chair: We are running out of time. I want to draw this piece to a conclusion and then move on wider things. I do not know if the Secretary of State had an opportunity to read a recommendation by the House of Commons Defence Select Committee in our report on the Navy, “We’re going to need a bigger Navy”. Did you have time to do that?
Ben Wallace: I did read it.
Q129 Chair: With that in mind, you were just talking about the availability of surface fleets. You mentioned that the numbers are going up, which is good to see, but I would just remind the Secretary of State that, during the Cold War, we had 13 destroyers in 35 frigates. Given the threats that are coming over the horizon, are there any plans for us to look at increasing the size of the Navy?
Ben Wallace: Overall, there is a plan. It is early days, but you heard the Prime Minister’s 2.5% of GDP by 2030, and I have always been clear that, as the threat changes, so must our investment and, indeed, our plans. I know that 2.5% does not match your 3% or 4%, but, nevertheless, on today’s predictions, it would equate to £55 billion extra. It is absolutely the case that what we need to press more and more into service is more availability and where we think it is the best way to meet the threat; if it turns out to be more vessels, it is more vessels. It may not be. It may be more subsea or more air delivered.
Q130 Chair: I just said the Navy, but I would just remind the Secretary of State of what Professor Andrew Lambert said at the RUSI conference only a few days ago, where he suggested that a country’s industrial capacity for a major conflict must be built before the war starts, and that is the message that we would like to pass on.
Ben Wallace: You do not have to be a professor to observe that, to be honest.
Q131 Chair: But you do need to be a Secretary of State to action it, though, and that is what we are saying today.
Ben Wallace: We are actioning it.
Q132 Chair: If that is the case, sir, if we are actioning it, there is a delay in replacing the Type 23s with Type 26s. There is a delay in repairing the Type 45s. There is a delay in building—
Ben Wallace: Actually—
Q133 Chair: Let me finish, please, sir. There is a delay in building the fleet solid support, there is a delay in replacing the Vanguard submarines, and there is a delay in purchasing all the F-35 requirement. Is the Navy not going to need a bigger budget?
Ben Wallace: First of all, let us deal with the delays, because you started this, Chair, and I can help finish it. The delay in the Type 26 is nothing to do with me. Since I have taken office, I have managed to shorten the delay by at least 12 months, so we now no longer have a 22-month delay.
On the Type 45, it was me who accelerated the PIP replacement. It was long before I even started that the floor design of the Type 45, which was 2005 or 2006, where I stood in Scotstoun on the deck of that ship, was put in place that caused the PIP problem. Since I have come into office as Secretary of State for Defence, I have put in place the accelerating of PIP. We are now on boat three of PIP, so, hopefully, we can get those ships out and running and increased.
On the issues around the Type 26 delay in the supply chain, we have, as I have already said, managed to sort out the problems that happened in supply chain, which were mainly around the gearbox, and put that in place.
On the future solid support ship, the competition collapsed. That was nothing to do with this office or, indeed, the MoD. When the bidders withdrew, I took immediate steps to de-spec the thing from having a six-tonne lift to a three-tonne lift, which was a standard off the shelf lift, which meant that it was both affordable and able to be delivered on time. I am pretty confident that the future solid support ship will be delivering the capacity that we need and, as you rightly pointed out, HMS Victoria is a very well-versed ship.
On top of that, you will find that, when we provide the Committee with the details, availability of the ships that we have are at the highest availability that we have had for probably the last 15 to 20 years, which means more ships at sea at the same time, dealing with the threat. I cannot do anything about accelerating ships in build immediately, and I cannot do anything about the emerging threat of Russia, given that most people have underplayed Russia’s threat for far too long, and that is not just across this country but the whole of NATO, including the United States, which is finding that they too have stockpile problems.
Q134 Mr Francois: To be fair, Secretary of State, that needs an answer. A year ago, in a report on armoured vehicles, which you may well recall, we said that, if you matched a British division against a peer division—and let us not talk in euphemisms. We mean Russia. This Committee, one way or another, has been warning about the Russian threat for quite some time.
Ben Wallace: I disagree with you on that.
Chair: We have a lot more questions to get through and we are running out.
Q135 Dave Doogan: We have the new medium-lift helicopter programme, which has just been launched. We have the Merlin fleet, which has come down from 72 platforms to 55 platforms, roughly a third of which will be engaged in training or unserviceable in maintenance. Then you have the remaining Merlins that will need to be on station at RNAS Culdrose. From that, you will need to have some hanging off the back of 31s and 26s, once they come off 23s. I know that we have Wildcats in the mix as well.
Does that sound like enough medium-lift capability in the Royal Navy? Would it not have been prudent to get a marinised version of whatever the new medium-lift helicopter is going to be to future-proof rotary wing platforms for the Royal Navy going forward?
Ben Wallace: On the overall availability of the fleet, I am not sure about the Merlin Force, but I can certainly write to the Committee with the detail its availability. We have already committed to extending the life of the Merlin for now on a number of issues. I do not know if anyone wants to take this here, or shall we write the Committee on rotary craft of the Royal Navy?
Q136 Dave Doogan: With specific reference to the strategic decision that said new medium-lift would be for the land domain only, and that there was no maritime requirement for new medium-lift.
Ben Wallace: It was fundamentally to replace the Puma.
Q137 Derek Twigg: Secretary of State, in light of Ukraine and the decisions in Madrid, it would probably be wrong not to take the opportunity to ask you a question around the size of the Army. Do you and the Prime Minister both agree that there is no need to stop the reductions planned in the army and to increase the size of the Army?
Ben Wallace: The current size of the Army is about 78,000.[7] If you take into account people in training, it is about 81,000. That is the current size. We have not reduced the Army as yet. We have already gone up from what we said we would. We were going to go down to 72,500. We have gone up to 73,000 because, as I have said, as the threat or the requirement changes, we should look at that.
I can tell the Committee that I asked the Treasury a few months ago if I could look at a challenge around the salary rather than the numbers, to see whether there is a way of reducing the overall salary bill of the Armed Forces. I do mean cutting people’s pay, but, fundamentally, the Navy has done a huge amount of work of reducing onshore Navy people to get them out into ships and asking itself why so many of its personnel are onshore and not at ship. If you asked some traditional questions of the Army, like why the Army is structured the way it is, there has not really been much challenge or thought about that.
The first issue, secondary to this threat, is whether we can get away from the arbitrary numbers game that we have all been in for 30 or 40 years, where someone just picks a number and you reduce it. If the Treasury is keen on reducing the costs of anything in a Department, whether it is the Civil Service or the military, we should be asking the question of whether there is a way of doing it separately, because you could have a lot more people for less.
Q138 Derek Twigg: Are you and the Prime Minister still in agreement that the planned reduction in the Armed Forces set out in the command paper and Future Soldier is correct?
Ben Wallace: At the moment, we are still in the position where we are working towards reducing to 73,000.
Q139 Derek Twigg: Are you in agreement?
Ben Wallace: Can I deliver the effect that is required in the defence command paper with a force of 73,000 plus the reserves? The answer is yes, but as the threat has changed—and that command paper was done before the threat—we should absolutely be looking at all things, including the size of all our Armed Forces. It is not just the Army, because what we may see—
Q140 Derek Twigg: So you are looking at whether to change the size of the Army.
Ben Wallace: Across the whole of the Armed Forces.
Derek Twigg: You are looking at that.
Ben Wallace: I would say across the whole of the Armed Forces, because it may be that one of the ways that we want to get more littoral strike group commando force out is by increasing the size of the Navy to get more crews. It may be that you need to recruit—
Q141 Derek Twigg: We understand that, but we have it on record now that you are looking at the size of the Armed Forces.
Ben Wallace: Armed Forces, yes.
Q142 Derek Twigg: That includes the Army.
Ben Wallace: Yes, it does, but could I just say one thing? I said this at the RUSI conference, so people are not surprised. If the decision was to be made to increase the size of the Army, do not be surprised if it is not in the cavalry or the infantry.
Derek Twigg: We know a little bit about the Armed Forces on this Committee.
Ben Wallace: It is quite interesting how attached people are to platforms, almost in a historical way. The lessons of Ukraine are that our deep fires, our air defence and our electronic warfare are deeply inadequate, and we need to invest in those areas. We got that slightly right in the command paper, because that is where we did increase.
Q143 Derek Twigg: I am just conscious of time, but we have that on record now. You mentioned looking at salaries. Again for the record, have you made or are you making any representations about increasing the size of the defence budget? You mentioned 2.5% before. Are you in any discussions or are you in agreement with No. 10 that there should not be any increase in the defence budget over and above what is planned?
Ben Wallace: Within my spending period, which finishes in 2024-25, I have not sought to increase that budget because—
Derek Twigg: That is not the question I asked.
Ben Wallace: Let me finish the answer. I have made it perfectly clear that, before Russia invaded Ukraine, we took a decision that there would be a dip—a sort of sunset and sunrise, as the former Chief of the Defence Staff used to talk about—in capabilities. While the 26s, 31s and the Boxers came on stream in the Army, for example, we were going to take that dip. The threat has changed, so I take a view that some of those areas we were prepared to take a risk in are areas where we should not be prepared to take that risk and, therefore, I have made no secret of the fact that that is a place where we would look for more money or more investment. I wanted to continue, because the PM was really the first to reverse taking the peace dividend and putting an investment in, and I want that to continue.
Q144 Derek Twigg: So despite the comments coming from No. 10 and the Prime Minister last week, you are looking at the size of the Armed Forces and the budget, so let me just put one final question to you. In that case, let us just keep on the budget. Based on the lessons and experience that we have all seen or had in Ukraine, is there anything that you can see that has happened there that in any way suggests that we can provide a credible response at whatever level with the current budget?
Ben Wallace: Our response against Russia has always been as part of an alliance. It goes right to the heart of our debates about how 360 our frigates should be. Should they be completely equipped with everything, or do we plug into a wider Navy? If you look at the Cold War, Britain had some real strengths but also some real inadequacies in its surface fleet, because it always took the assumption that it would be part of an American/NATO umbrella. It is absolutely the case that, if we were engaged in a conflict with Russia today and yesterday and tomorrow, we will always be reliant on the alliance. On the plus side, which slightly goes to the availability of ships and things like that, we now have Sweden and Finland coming into NATO to protect the north Atlantic.
Q145 Derek Twigg: I accept all of that, but that is not the question. Given the lessons and experience, and the threat that you have talked about coming from what is happening in Ukraine, is there anything there that suggests that we do not need an increase in the defence budget?
Ben Wallace: I have said I would like an increase in the defence budget. Maybe I could read out what the Prime Minister said at NATO.
Q146 Derek Twigg: Is he listening in and giving you lines to take here?
Ben Wallace: No, it is really important that you understand the context of what he said, but also what he said and why it is important. He said, “The truth is that we, as an alliance”—that is NATO—“are compensating for years of underinvestment in defence”. I do not think that anyone on this Committee would disagree with that statement. “We need to invest in the long term in vital capabilities like combat air, while simultaneously adapting to a more dangerous and competitive world. The logical conclusion of the decision is 2.5% at the end of a decade, remembering that goals set in Wales in 2014 were for a different era”, so that is, like you said, a recognition that the threat has changed, that we need to invest, and that, in 2030, by the end of the decade, it is 2.5% of GDP.
Q147 Mr Francois: À propos that, Secretary of State, the integrated review and the defence command paper were published before the invasion of Ukraine, which we all know, in security terms, is a 9/11. It is a complete game-changer. That has been evident already today.
We are an all-party Committee, but my colleagues were happy for me to read out one paragraph from the conclusions of a paper that was released a couple of weeks ago by the Conservative Back-Bench defence committee, of which you were given an advanced copy as a courtesy, where they concluded, “It is recommended most strongly that the conclusions of the integrated review and the defence command paper be revisited and the associated military cuts to both manpower and capabilities be halted immediately and a threat-based review carried out, post Ukraine, supported by increased defence spending in real terms”.
That is the view on the Conservative Back Benches, but I suspect that most of this Committee would not disagree with it one jot. Is it likely that there will be some new chapter to the integrated review? There was a previous review a few years ago that was slightly overtaken by events. Will there be a further document or a new analysis in light of new events?
Ben Wallace: I cannot speak for the integrated review. It is a Cabinet Office/No. 10 document. What I can say is that I re-read the defence command paper the other day. A lot of the assumptions are absolutely in the right place—resilience matters, investing in EW and SIGINT, and all the extra stuff in Army 2030, which we were looking at. They absolutely turned out to be exactly the areas we need, such as around unmanned subsea, etc.
Do I think that we should do a piece of work looking at the threat and the lessons learned, which should infuse into the Department and change, if necessary, some of the things? Yes, we should, and we will. Of course, we are doing it right now in an ongoing process, but there is definitely a time when we will have to absolutely look at Ukraine and learn the lessons. We are learning some lessons as we speak—supply chain on. In the old days, you would not have viewed them as complex weapons, but they are now, like the NLAWs and things like that. Richard, in our day, they were viewed as pretty basic and did not have a complex supply chain. Now, they are as complex as a warship, which leads to big problems when you are no longer buying them.
Those are absolutely really important things that we are learning right now. The use of the ability to provide resilience to your allies in training. We sent the Ranger battalion to train on the NLAWs literally a few weeks before the invasion, which showed that, if you could—
Q148 Mr Francois: We are tight for time, but, to be clear, you are not talking about a full-blown review of the review, but you are talking about a lessons learned exercise.
Ben Wallace: Absolutely, and we will be happy to share as much of that when it happens. There are two parts to this—when we do a fixed lessons learned and whether you do that at the end of the conflict, and when we can do a running commentary that is so important that we have to get on with it.
The plus side is that we have been given more money. Some of that £2.3 billion of military aid and support is to refurbish our stocks, because we have given some away.
Q149 Chair: Just to expand that further, though, if the Prime Minister is saying he is going to increase the defence budget by 2030, there is a recognition that we are going to need more money. The world is getting more dangerous, so we need to invest more in defence. You have articulated that now, with a recognition that you are going to have to look at aspects of the integrated review.
What I do not understand is that, when you look at the library’s own figures—and they have crunched the numbers here—they have put in the impact of inflation on what is going to happen to the defence budget over the next few years. The defence budget decreases in 2023-24 by £1 billion. It goes down by a full £1 billion, because of inflation. The reality check of that anyway is the cost of fuel and of all these other things that have gone up, which we are all experiencing. The same applies to the Army, the Air Force and, indeed, the Navy as well.
When I read this list of equipment that we are having to delay, because we do not have the money to repair or maintain them, or, indeed, purchase and replace, you are going to need an increased defence budget to meet the minimum requirements that we have today, let alone the threats that are coming over the horizon that you understand, more so than potentially others that are around the Cabinet table.
Ben Wallace: First of all, our defence budget is in a four-year chunk. Over that period, we had significant rises in years one and two. It was flat in three and drops off in four, so, if you want to take it in a chunk as a four-year thing, the Treasury would say to me, as it would say to you over the four-year average, that it is an increase.
As I have been clear about, when we had our defence settlement, inflation was running at 1.5% or whatever it is. We are a capital-heavy Department and, therefore, more vulnerable to inflation than some other Departments, because £14 billion or £15 billion of procurement is subject to inflation. It is very important to recognise that we have to find measures. Indeed, the Government are looking at the impacts of inflation.
For me, as I said earlier, the start point of worry is the middle of the decade. It is not here and now. I have, on paper, a theoretical underspend of £800 million of capital in this financial year, because of the way that the profiling of the money of our budget was given. That is why it is really important that we work through the four-year period. I can assure you that I make sure that I get the money out the door and that I will be talking publicly about, in the middle of this decade and onwards, why there is a requirement for more defence budget.
Chair: It is really welcome news that you are looking at aspects of the integrated review, given the threats that are coming over and that you are looking at the composition of our Armed Forces. That is something that we can take away.
Q150 John Spellar: Secretary of State, you referenced supply chains and finding that there were severe problems and inadequacies. By the way, that is not just a British problem but an international situation. In the past, defence departments around the world have tended to leave this to primes to manage these supply chains and are now finding a whole number of problems, partly, of course, in terms of unsatisfactory suppliers and those who may be potential enemies, but also a lack of skills, a lack of production capacity, and very long timelines. This is now almost the major topic of international discussion within the alliance. What are we going to do about it?
Ben Wallace: First and foremost, skills are important. Secondly, we are going to place orders because, as I have said on numerous occasions, the hollowing out of our Armed Forces that happened under my Government, your Government and previous Governments often took place in the unseen space—the ammunition stocks, the fixed maintenance, the yards. It was all the stuff that was unsexy and unglamorous and that no one knew about. That has been going on since I was in the Army in 1991. It is not a party-political point; it is a fact that you can track where people took money out of defence in order to pay for maybe a new platform, but it went to war unequipped or un-bombed up, etc.
One of the reasons that I am reticent to over-speculate on the size of the Army or the Navy is because I have to properly equip the young men and women who we are sending on our behalf right now as quickly as possible, because the lesson of the Russian invasion of Ukraine so far is that you can have all the mass you like on that road to Kyiv, but, if you do not have the right comms, the right anti-UAV and the right ammunition, you are dead in large masses. That is a really important lesson.
You are right. The first thing that we are going to do is to place orders with some of those guys. Hand in hand with the order is, “What are you now going to do to expand the production line?” Everyone loves the NLAW, which is made in Belfast. You can imagine how many countries are now interested in buying the United Kingdom NLAW. Even though it is a joint venture between Sweden, Thales and everything else, it is made in Belfast.
Not surprisingly, that supply chain simply has not been there, and so placing the orders will start stimulating it, but the key here is a relationship with the primes to say, “You have to take some risk as well”, because some instinct of some of the primes is just to keep going at the similar pace and bank the order book, but not double their production line or recruit more young men and women from our constituencies to come and work in them. We have to make sure that we push them hard on investing in their own production lines.
I can only do so much, John. We are not going to nationalise the production lines. Some of the primes have spent a lot of money buying back their own shares in the last few years, rather than investing in their manufacturing base.
Q151 Richard Drax: Secretary of State, we all understand that you have inherited a very difficult situation and, quite clearly, you are doing all you can to speed things up. General Sanders, the new head of the Army, says that this is our 1937 moment, which should be pretty concerning, yet we have a budget that is at 2% max. I doubt that it is a full 2%, if you take into account everything non-military within that budget. The Prime Minister is now saying that he is going to raise it to 2.5% by 2030, by which time, God forbid, we could be at war with Russia—with NATO, I accept.
I would have thought that, in 1937, more money was spent, more people were recruited to the Army, and more planes and ships were built. We had plenty of ships, thank God, which we do not have today. You cannot produce these things just like that, and I accept that, but what we can do, which would be a strong signal, I would suggest, is to increase the budget to a figure where we can restock, really go to town and get all the things that we need.
We heard just the other day, for example, from two people on aircraft that we simply do not have the ability to take out ground-to-air missiles. One of the lessons learned in Ukraine is that aircraft going into enemy airspace are being shot down. Even the Russians are not doing it, because these missiles are so effective, and we do not have the kit in the planes to detect and destroy these batteries on the ground.
We are not ready for war, I would suggest, and from every bit of evidence that we have had here, that is strongly supported, although I quite accept that you are doing all that you can. Perhaps you would go back to the Prime Minister and say that we need a bigger budget and we need it now.
Ben Wallace: Richard, everything that I try to do is really to make us more ready for war—more deployable, more ready and more available. In this world, which is more global than ever, you never know where it is going to come from, and I totally agree with that. At the very least, it is to sort out the hollowing out, which was slightly a fraud. I want, whatever its size, our Armed Forces to do what it says on the tin. That is so important. Otherwise, we are betraying the people in the Armed Forces.
I know that that means that you and I might clash on the size of something, but I would rather have a perfectly formed, properly wrapped military unit that is protected, etc., than half and half. You and I served in those brigades and we all know what they are like.
There is lots of investment going in. The Army is going to have £43.1 billion—or maybe it is £41.3 billion—of investment over the next 10 years. I have brought forward Boxer and the Challenger 3 upgrade. In fact, I would not be surprised if you see more Boxer coming forward.
Q152 Chair: Is that with turrets?
Ben Wallace: We will see. I am trying to resolve Ajax, which we know is a troubled programme. I might come to this Committee asking for all sorts of things in the future, but, fundamentally, it is important that we do that.
You are right about readiness and being ready for war, and it is uppermost in my professionals’ minds—the military sitting on either side—that that is what we are trying to do. We are improving and delivering. We have to deal with the ammunition stocks, with the personal equipment of these individuals, and with the skill base in our industry, because there will be nothing to replace it, and then we have to ask the Chancellor.
Chair: Secretary of State, let us see if we can end on a positive note, which is going to come from Gavin.
Q153 Gavin Robinson: You are sorely mistaken, Chair. Secretary of State, we will not fall out, because you are right about NLAWs and the utility that they have shown in Ukraine, and I think that you are right to say that there is a requirement on manufacturers to share risk, albeit, in that particular platform, it is much more complicated in the recommissioning of certain important parts. That is not just a risk that a manufacturer can take; that is through years of testing and so on, so there are some complexities in this that are not as easy as suggested, and there is risk to be shared and production to be increased.
Could I just ask you then about the continuing change in dynamic in Ukraine? How is that impacting or how are you managing the impact of requirement A being required in location B, only to find that the dynamic and the environment changes and the requirement is no longer there, on both provision of equipment and then training? Is that something that you are managing well? Internationally, we are recognised for the contribution that we are making in this, but it nonetheless remains a challenge and will continue to be a challenge, so could you help us to understand just what that dynamic is like?
Ben Wallace: The Ukrainians have got to a point where the Russians have resorted to base. They have gone to a meat grinder-type process of Soviet grinding away, metre by metre, at huge expense to themselves and to the environment that they are operating in, smashing up and flattening infrastructure, and destroying, by the looks of it, most towns. No rules of war seem to apply, ranging from rape and war crimes to targeting civilian infrastructure, food production, and supermarkets and shopping centres.
That is at a cost, but it is a Government and regime that does not seem to care much for its own people, and it is grinding through. The Ukrainians are managing to make them fight for every metre. So far, Russia still does not have any of its major objectives. We estimate that over 25,000 of their forces have been killed in this short period. To compare that, in a decade of the Soviet Union in Afghanistan, they lost 15,000 people. 25,000 is our estimate. The Ukrainians are estimating 35,000, so I would say somewhere in between, but add that to the rule of thumb, which is that, for every one killed, there are three injured or damaged people.
The Russian ammunition stocks are declining significantly. They are taking out of storage ancient stocks. One of the reasons that they are not as effective at the moment is that they are taking out shells and things that are 30 or 40 years old. They just do not fly as well as they are supposed to. Some of the equipment that they have been using is the wrong missile system at the wrong targets. The Russian system still cannot do dynamic targeting. Their aircraft are not flying. They are in some areas, but they are not flying where they would like to. Given the scale, with 200-plus aircraft, they are just not able to deliver the effect that they want.
There have been significant numbers of changes of generals who have been sent on extended holidays while a new replacement appears, or, indeed, casualties taken by senior officers, mainly because they are being forced to go forward.
The Russians are not winning. Yes, they have taken some ground recently, but that is partly because the Ukrainians have taken the quite right decision that standing or fighting in a certain part is not worth the loss, given that what they will need to do is to have a withdrawal and regroup to strategic boundaries that make a difference; it is a perfectly logical thing.
The Russian Navy is stuck. For all of the fact that there is not really a Ukrainian Navy, it has had an interesting effect on missiles and vessels. They are hugging the coastline and do not really seem to go very far away from Crimea, for fear of being hit by coastal batteries or Turkish UAVs, which makes them incredibly vulnerable to strike. We saw the flagship go to the bottom of the Black Sea, and numerous ships being hit by a range of ammunitions.
That is an interesting question. It is the sea version of the tank at the moment. Unless you have active protection armour and a proper counter-missile defence capability, you are very vulnerable. My point to the Army about both Boxer and Challenger is that, if you focus on pure numbers but you do not protect it properly and give it, let us say, a Javelin attached or an ability to reach, you are just going back to parade ground numbers versus, in my view, a proper wrap. It is the same in the ships as space.
In terms of Britain’s contribution, we are at £2.3 billion of military aid. Our contribution has been everything from military aid, such as NLAWs, all the way through to convening the international donor conference. We did it in February. I did it in March, and now the United States has stepped up to chair it, and it has grown from 25 nations to 40 nations. It is mainly co-ordinated through an American base in Stuttgart. I am not sure, but if you want to go and visit it, I am happy to try to facilitate that. It is the IDCC, the international donor co-ordination centre. You will find that about 40 people there are Brits. We are the biggest single contingency. We are now transferring that knowhow into training and co-ordinating training, because, as we have gone up the pipeline from, effectively, fire and forget—simple, in a sense, but very capable NLAW, point at something and blow it up—into the HIMARS and the GMLRS, and some of our GMLRS is in country now in Ukraine. That requires more training, and that is really important.
I have laid a statement today in the House. I do not know if it has been. I was hoping that it would be in advance of the Committee. It is just giving detail of the training that we are rolling out of 10,000 Ukrainians in the UK. That is not special arms. That is basic battlefield casualty replacement training. We have started to do that. I am happy to write to the Committee in private about where those locations are. It is not secret. What we just do not want is piling in, and we have started to do that throughout the United Kingdom. Some of them are getting to enjoy British training areas and an Army packed lunch, so they will be wanting to go home.
Q154 Chair: I hope I speak for the Committee, and indeed others outside of this place, in saying that Britain can be very proud of the support that we are providing the Ukrainians in their hour of need. I would ask that we make sure that we do not conflate the two budgets, because the support for training Ukrainians is coming from Her Majesty’s Treasury. That needs to be separated and not conflated with the defence budget, which we spent a bit of time talking about. We would be delighted to take up that offer. First, if we can have a briefing—we have done it in the past—over in MoD, we would be delighted to have an update on that. We will certainly consider your invitation to visit Stuttgart as well.
Ben Wallace: Come to a location where we are training them, to see them being trained here in the UK. You will be very welcome to do that.
Mr Francois: Bring a rain cape or a poncho.
Chair: Thank you very much indeed. You have been very generous with your time. We have covered an awful lot of ground, not least to do with the national shipbuilding strategy and beyond. Thank you very much indeed to Vice Admiral Sir Chris Gardner, to Rear Admiral Rex Cox and Rear Admiral Paul Marshall and, of course, to the Secretary of State. This brings a close to our Defence Committee hearing today.