18
Examination of witness
Tracey Lee.
Q73 The Chair: Good morning and welcome to this session of the Industry and Regulators Committee. In the light of last year’s strategic defence review, we are looking in particular at the relationship between the Government and the defence and related industries. This is being broadcast live on parliamentlive.tv and BBC Parliament. A Hansard transcript will be taken, which you will have the chance to change should we misunderstand anything you say. My name is Dianne Hayter, and I will introduce my colleagues as they pose their questions. First, please could you say who you are?
Tracey Lee: I am the chief executive of Plymouth City Council.
The Chair: We are delighted to have you here. It will be obvious from our questions why this is of particular interest, but we have to acknowledge today that, just yesterday, something brought the whole issue rather close to home, particularly for Plymouth: the Russians were about 40 miles from where you live with some live ammunition. That is obviously felt very much by the people whom you represent here today.
I will begin with a fairly broad question. Given what we are looking at, could you describe the relationship your council has with the Government in relation to defence, particularly the defence growth deal? To what extent do the Government provide strategic leadership and how closely do you work with them?
Tracey Lee: Thank you. I am delighted to be here, to let you know what is happening with Team Plymouth down in the south-west. Our relationship with the Government in relation to defence is a long-standing one. Plymouth has the largest naval base in western Europe, so that relationship, in terms of the defence of the realm, is always embedded in what we do; it is in our DNA.
It was around 2024 when we came together with our MoD colleagues to recognise the significant investments needed in our dockyard to prepare for the continuous at-sea deterrent upgrade. The submarines that are being built in Barrow will be maintained in Devonport, in Plymouth. That upgrade was clearly a significant moment for a city that has had its ups and downs in defence investment and the dockyard. We have had feast and famine in our history. The dockyard has been there for 400 years, and Plymouth exists because of it.
That relationship started from a point of understanding what the investment meant and quickly recognising the twin approach of making sure that Plymouth played its part in the defence of the realm—a primary purpose for the whole of the UK, but with Plymouth very much as part of the spearhead for that—and needing to put that in the context of a lot of work that had been done in the city and across the subregion to make sure that we were expanding and diversifying our economy.
Our biggest opportunity of significant investment—last week it increased to £7.1 billion but at the time it was £4.4 billion—became the biggest risk for us as a city. That is because, by ploughing forward with the defence of the realm, Babcock needs 5,500 new workers in the dockyard over the next 10 years to replace an ageing workforce. At the moment, 11,600 people work in the dockyard. It could suck workers out of every other business in our city and across our region, so unless we worked collectively with the MoD, other government departments, Babcock and our defence industries, the biggest opportunity would become the biggest threat to us as a place. From there, we have been working with the Government, particularly the MoD and MHCLG (the Ministry of Housing, Communities and Local Government), which really got the need to make sure that both parts of that equation were balanced. The phrase “a rising tide lifts all vessels” is probably one of the straplines for what Team Plymouth does.
The MoD and MHCLG are the primary government departments that we have worked with over that time. It has not been an easy journey. It has been tricky to navigate how we move forward with such a significant opportunity, wanting to maximise the benefits across the city. But we are in a good place. We have two sponsoring Ministers for the work that we are doing, and engagement from other government departments. That is vital because we can and want to do a lot by ourselves as a place but, as well as needing 5,500 new workers in the dockyard, we are now the National Centre for Marine Autonomy across the UK—we are the national focus for that. With that multiplied on top, over the next 10 years we need 25,000 new workers in our labour market, which is not something that any one organisation or place can do alone.
Working collectively with Government, we absolutely have our eye on the prize, which is to make sure that we can support the defence of the realm; to grow our businesses—as you will all recognise, defence is changing massively in terms of the technology, kit and businesses involved—to use this as an opportunity to raise many of our residents out of poverty, because defence jobs pay well; and to make sure that the pipeline of skills is there. Babcock’s order book goes up to 2070, so the people who will maintain the submarines and the dockyard either have not yet been born or are in primary school. We are looking at the short term, but our programme is very long term.
The Chair: That is a fascinating start. I am amazed by the challenge of dealing with three different cultures: a government culture, an industry culture and a local government culture all by themselves. Is that a big challenge when managing this?
Tracey Lee: It is a big challenge. We use different language to say the same thing. It has been important to build relationships. Key to that has been a triumvirate between three entities putting their skin in the game: the city council making sure that we have made investments, the MoD putting the defence deal on the table, and Babcock making significant investments, particularly in the heart of our city centre to help regenerate it. The University of Plymouth and City College Plymouth have also come alongside, as well as our voluntary and community sectors. They recognise that the social value that comes from so many defence contracts is vital to ensure that we can support those who are furthest from the labour market and those who need the most help to get into work. We start by trying to understand what each other is saying.
Q74 Lord Fuller: It is a pleasure to meet you. During Covid, Tudor Evans and I spent many hours on conference calls, when I was leading the district councils and he had a leading role at the LGA (Local Government Association). It is nice to see you, Tracey.
You have clearly articulated the strategy and some of the strategic context around your local authority in Plymouth. I am interested to know what precisely that turns into, in practical terms. What programmes do you have to reach out with? You touched on the skills but there may be others. Importantly, who pays? Is it the local taxpayer or from your own resources, or is there financial assistance from the Government to help you achieve their aims?
Tracey Lee: Thank you so much for that question. You can have as many strategies and visions as you like but, as we often say, that does not butter any parsnips—it comes down to the detail of exactly what we are doing. In true local government style, we love having a bit of governance around this, so we have an executive board that leads this process. Unlike Barrow, where they are moving to a company structure, we felt that it is important to make sure that the triumvirate is there. We all have skin in the game, and we are not outsourcing this to anyone else. We are making sure that we are absolutely focused on the work we are doing.
We have six workstreams. We have a business and innovation workstream, particularly around our marine autonomy. That is led by the vice-chancellor of the University of Plymouth, who is driving this forward and capitalising on having the National Centre for Marine Autonomy. Since we announced the national centre, we have had a 700% increase in inward investment into the city, which makes a big difference. Names make a difference, but we have to capitalise on that, particularly in relation to the regulatory environment that works to support businesses; I am sure that you will want to touch on that at some stage.
On education, for children who have not been born yet or are in primary school, we have a long-term programme for STEM (Science, Technology, Engineering, and Mathematics), making sure that our children are interested in jobs in engineering, as well as so many other jobs in the city. That work is led by Babcock.
On post-16 skills, we need to upskill our existing workforce. We need those who are not in work to get into work, because we have 25,000 jobs. That is led by our City College.
On city centre housing and regeneration, as well as 25,000 new jobs we need 10,000 new homes in the heart of our city centre. I lead the workstream on that; it is very much led by the city council.
On transport, we know that people will not all live in one place and they need to move around. The Plymouth Metro system, and how it connects with Cornwall and Devon, is absolutely key to that. The managing director of our bus company leads that workstream.
On social value, we are thinking about how to make sure that we have support for those who are furthest away from the labour market and that we are supporting our environmental aspirations. That is led by one of our fantastic partners from the voluntary and community sector.
Lord Fuller: I sense that you are convening all these partners. Are you paying the food and rations to wire them all together? How does it work?
Tracey Lee: The way it works is that we all put what we can on the table. It is a bit like a safari supper, where everybody comes in and brings something. From a city council perspective, we have made a public realm investment of £50 million in our city centre, because we know that it is important that it is regenerated. The impact of that will be the growth of our city centre. We have a strategic partnership with Homes England, which has made strategic investments in sites in our city centre. Babcock has committed to a global capability hub, an office block that will have 2,000 employees in the heart of the city centre. City College Plymouth has been successful in becoming a defence technical college. Therefore, we have corralled funding from wherever we can.
We are spending our own money across the partnerships, but we are also taking opportunities to bid for money. We are working very closely with government departments on where those opportunities might be. We are grateful that the MoD has named us as one of the defence growth deals, which includes a £50 million investment from that department. What is important is that other government departments come alongside that and double that money, and we make sure that that investment pays strong dividends. There is a cocktail of funding that comes together.
Q75 Lord Barber of Ainsdale: Nurturing these partnerships sounds like a very creative process. Babcock is obviously a major player, but, within the wider defence industry, what kind of relationships do you have with other firms that are playing a part in the sector?
Tracey Lee: We have just had a big inward investment from Helsing, which is a major player in underwater gliders. Teledyne Marine and Thales are both in the city. There are a lot of organisations that are defence, security and, particularly, marine autonomy businesses. That clustering is important: it is the idea that you can start your early career in one business, you move on to another business, and you might then be the managing director of a company in another area. There is also the permeability of the businesses in the city that are dual use: as well as having organisations that are defence and security focused, the marine autonomy businesses are doing amazing things around environmental monitoring, and the protection of underwater cables which is absolutely crucial.
Businesses clustering is important, but not just clustering in the city: we have some important clusters across the whole of the region, because we are very conscious that business will go wherever business needs to go. Our South-West Defence and Security Cluster includes about 600 businesses across the region coming together to look at opportunities to work collectively. Those are opportunities to come together. When thinking about aerial drones, underwater drones and land autonomous vehicles, why would you not try to build a system that works for security more widely? Very often, the businesses might be working in one part of a system, but the magic actually happens when they link with other businesses that are doing amazing things.
Lord Barber of Ainsdale: You mentioned your concern that you do not want to starve other businesses and other sectors, as the defence area will potentially grow very significantly and some 25,000 extra employees are anticipated over the next 10 years. Where will you find those workers?
Tracey Lee: This has to be a widespread, detailed and planned military operation, quite frankly. We have a skills escalator programme. For people in work, we need them in higher-level jobs, those different jobs for the future; for people who are closest to the labour market but are not in work, we need to get them into work and on that escalator; and for those who are furthest away from the labour market—we have a lot of economically inactive people in the city—we need them closer to and in the labour market. There is no one magic solution for that; we absolutely have to work across the piece.
We have done some work that has been funded by MHCLG, some detailed analysis of the skills that we need for those 25,000 jobs. When do we need the compression welders? When do we need the nuclear physicists? How many of each do we need? There is the way in which our university is growing its graduate programmes, the way in which City College is growing its programmes, but also the role that the independent training providers have in this is absolutely vital. It has to be a whole-system approach. There is no one organisation that can do that. The tricky part is that the skills system is fragmented, so you have to take opportunity for funding wherever you can to try to build that picture and bring it together around the place.
The Chair: I bet you did not imagine when you went into local government that you were going to get into areas such as that, did you?
Tracey Lee: I really did not. I started as a recycling officer.
Q76 Lord Teverson: Good morning, Tracey. I understand exactly what you mean by feast and famine. In the past, when I represented Plymouth in the European Parliament back in the 1990s, each fiscal year there were more cutbacks at the naval base and it was all downhill. It is just great to hear you sound so optimistic about everything that is happening at the minute.
We are all very aware in Plymouth of the prime contractors, such as Babcock et cetera, which are really important, but much of the development on the defence side, particularly around things such as marine autonomous vehicles, will probably be through the SME sector, which is crucial in innovation and moving defence capability forward. I wondered what relationship Plymouth city and Team Plymouth have with the SME community and how you attract those who maybe want to establish defence capabilities down to Plymouth and deal with those who are already there. I would be very interested to hear your response.
Tracey Lee: Plymouth City Council is unusual in that we have kept a strong economic development unit within the council. Many other councils have had to shed that just because of the financial circumstances, but we have kept our economic development unit. That has meant that we have been able over the years to build really close relationships with our SMEs. With the exception of Babcock, we are a city of SMEs, so that relationship has been really important. What is also really important is the way in which our SMEs self-organise. It is not all about what we do; they will organise themselves, and that has been key as well.
Moving on to this next level, as I said earlier, the biggest challenge and threat we have is our biggest opportunity. Our SMEs worry every day about the poaching of staff into those bigger companies. On the one hand, I love it when I see wage levels go up; on the other hand, that is not great, because we just get that race to the top and our SMEs cannot afford the wage levels. That is why the SMEs’ involvement in Team Plymouth is so important. The workstream on business and innovation is absolutely about what works for those SMEs. Some of our really innovative marine autonomy businesses are sitting at the table, and I know our vice-chancellor will say, “When I hear from some of our young managing directors of those companies about what they need, we will know whether we have landed the right things for those businesses”. But other businesses are genuinely worried.
We have a strong manufacturing base. People often think of the south-west as ice creams, cream teas, buckets and spades, but 13% of all marine engineering in the country happens in Plymouth, so we have a strong manufacturers’ organisation. We can only do this together. That support for businesses happens in a number of ways. Regulation is key and we are absolutely delighted that a Bill has been introduced to look at the regulatory environment, because it has stayed as it was for hundreds of years, yet the tech has changed so massively. The idea that you have a captain of a vessel on or under the water, compared to the autonomous vessels that we have now, is a very different thing. No one wants danger at sea, but we have to move forward with some of that regulation.
The reason for that is that Plymouth Sound is a natural testbed for this kit. They can test it in a very safe way. It is highly instrumented, so they can test their kit and know what is happening. The cycle at which that sort of technology is being developed and then got to market has speeded up massively, so the regulatory environment keeping pace and allowing that testing is really important. We hope for good things. We understand that the marine autonomy element will be part of a sandbox test for the Bill when it comes though, and that is really important, working with MCA to support our businesses, keeping everyone safe but making sure that that testing can happen.
Space is also an issue. One of our MPs’ phrases is “Build more sheds”. You might ask, “Why is that when you’ve got so much water?”. It is because our businesses need space to manufacture, test and prototype, and then to get that kit under the water. The programme to make sure we are doing that is really important. This is where we pull other workstreams together. We have a freeport. Our freeport has always been about innovation and design, so the opportunity is for it to be at the cutting edge of helping with those sheds that are so important for industry and which are expansion space for our SMEs to grow.
Lord Teverson: That is very comprehensive; thank you. To follow up on that point, when we talked about testing aerial drones in the UK, the regulatory issues that you talked about have been very constraining on some of the development that has taken place. Are you happy as Team Plymouth? Will the sandbox or the regulatory system be amended enough for marine autonomous vehicles to be tested in the way that they need to be? Is that something you are confident about, or is that something where you need more pressure on government? Hopefully, you will continue to have a Defence Minister as an MP after this week.
Tracey Lee: It is a really positive start but there is so much more to do. What is vital is to listen not to me but to those businesses that are really at the cutting edge of this work: what do they need? What is great about having a cluster of businesses is that people can come and visit them, walk around and see them quite literally tinkering with kit next to a computer. There is normally a spanner and a computer where they are programming and upgrading the kit, and seeing what is needed. But there will inevitably be tension. Those maritime regulations are there for a reason, but we need to work at pace.
One of the key things that we have been pushing for is for that Bill to move forward at pace. Like everything, you do not want it too quick, because you will probably get it wrong, but if it is too slow, our businesses will be left behind. They have some amazing technology for both defence and security. On the horizon for us in the south-west is the floating offshore wind in the Celtic Sea and the opportunities that autonomous vehicles provide to support that whole system. Security can be defence, but it can also be our energy security.
The Chair: I do not know whether it was apocryphal, but we heard one story about an uncrewed vessel needing lifebelts.
Tracey Lee: Yes, and that is the key part: when you have regulations that are for a particular time and for people and you are trying to adapt them. But we need to do this at pace.
The Chair: When that Bill comes to the House of Lords, we are, as you know, very good at scrutiny and making sure it does what we want it to do.
Q77 Lord Best: You have stressed the positives, and there are loads. It is an impressive story. But I was counting the downsides for the local community, and they are very real. There are your 25,000 extra workers, meaning that a lot of workers will be sucked out of other industries to go into defence, and other people will be worried about that. I was also worried about housing for the extra population. Plymouth’s housing problems are not as great as a lot of other places, but you still have severe shortages. You have local government reorganisation coming along, asking whether you will you be part of a wider Devon combined authority or go your own way. There are quite big issues with and downsides to the expansion and growth of the defence industries. Can you talk a bit about how you are reacting to those?
Tracey Lee: Absolutely. With every opportunity comes massive risks. Our job as Team Plymouth is to meet the opportunities and mitigate those risks as best we can. That is tough, because the defence of the realm has to move forward. The MoD knows what it needs to do and it needs to keep moving. We have tried to corral other government departments to help us with this. If we have a mission-led Government, this needs to be mission-led. We tend to join up at place and try to stitch stuff together as best we can, but we need other government departments to recognise the challenge is now. Therefore, the pace at which some of the funding comes forward is slow, and we are never quite sure of the funding routes for that.
That applies to housing, where we need to get moving with 10,000 homes in the city centre. We know we need to land that, because as well as upskilling our own population, we need people to relocate. Those 5,500 people in the dockyards who are retiring might not all want to live in the houses they are in; they might want to live in different housing. The housing mix is really important.
Although the challenge of housing is not as extreme as in other parts of the country, we have on average 50 inquiries for every rental property in the city. Our housing market has collapsed. You would think that, with that level of demand, the private sector would just step in, but the gap in the requirements—the need to meet the infrastructure needs of property—means that the private sector will not come in at this stage to fill that housing gap. We need grant funding to be able to move forward. Homes England is alongside us, but we are working with MHCLG on the housing funding that will be really important for the future.
You are absolutely right that keeping all those other businesses alive and well and supporting them is important. The wage levels for Babcock have increased. That is money on defence spend, if those wage levels go up to too high. There are also businesses that are at real risk of not being able to find those workers. The only way forward is if we all work together, otherwise all we will do is cannibalise each other. That includes the public services as well, because the project managers we will need for local government reorganisation are also highly sought-after by Babcock, for instance, in the dockyard. The same is true of HR staff and asset management people. The impact will affect the public service as well as the private sector, if we do not get this right.
Q78 Lord Udny-Lister: I have two questions. First, to what extent is the investment fully funded, either by the Government, by yourselves or your partners? Are there shortfalls and problems as a result of that? Secondly, before you started on all this, what level of consultation did you receive from the Government before the growth deal was announced? Alternatively, has it just evolved without any kind of consultation?
Tracey Lee: Is it fully funded? No, because it is a 70-year programme, so it will not be fully funded. We are very much in the foothills of what we need to do. Programmes such as this one are massive. However, I will tell you the funding that we have had in the past year—when I say “we”, I am talking about the place not the council; I would love this money but it is not mine. We have had £50 million from the defence growth deal. We are one of the five defence growth deals. We are submitting the business case for that at the moment. That will go into the MoD, and we hope to hear about that in the autumn. It has taken quite a long time to get to this stage, but I think we are clear on that.
We have had £10 million for our defence technical college. We have had £20 million from the Local Innovation Partnerships Fund for university-led innovation. We have had investment from the Crown Estate. Babcock and the national Capability Centre has made an investment commitment to the city centre of £60 million. We have had £9 million from the Office for Students to increase undergraduate defence training courses for the university. That is all in 2026.
We are working with the Department for Work and Pensions. We are part of the Connect to Work programme, as most places are. We could spend four times the money that the DWP has given us to get people into work. We know that the programmes work, but we just need more money to get people into work. We are constantly making the case to the Government that, if you can bring together the funding programmes that the Government have and use them in Plymouth, you could use them quite wisely to double the money that is coming in. If you think about the defence growth deal almost as the seed money, if other government departments come alongside that, you get more for your money. That is always how we work in a place: we are trying to look at matching that money.
On the consultation, we were working with the Government from 2024. Frankly, we were pushing and encouraging them, saying, “We need help. With this level of investment coming to the city, if we do not do something collectively with you, as government, this city will not be able to do the job you need it to do for UK plc or for all those other businesses that are needed”. In many ways, it is slightly the other way around: we have done a significant amount of lobbying, as partners across the city, to make sure that other government departments understand the primary needs that we have, as a place, to defend the realm and to make sure we can support the businesses that will be part of that defence and security environment going forward.
It is a bit of a reverse consultation—pushing and cajoling, sometimes, to make that happen. I am very pleased with where we are, but there is a lot more that we need to do. There are lots of places in the country that have a story about growth, and all those stories are absolutely valid and relevant. The difference is that, because our story is about defence-led growth, I would say that we go into a slightly different category, because it is so important for the country as a whole. If we are in a category that is about general growth, the danger is that we would not be able to access the resources that we need to do this job for the country.
Lord Udny-Lister: Can I just follow that up? My understanding, which might be wrong, is that Barrow has gone down a very different route from you, in that there is much more central government control over the process there. From what you are saying, you seem to be very much led by the city. Is that true?
Tracey Lee: It is absolutely a partnership, but I would not say that it is top-down from government. We have taken an approach that is system based, which means looking at a whole-city system and asking what it needs to do its work. The partners in the city—I include the naval base, Babcock, our university and our private sector partners—all recognise that if we do not do something, our biggest opportunity will not be delivered.
We started with ourselves, because that is always the best way—start with what you can do—but we soon recognised that this was much bigger than a city endeavour. Our partners across the region are involved. Cornwall, Devon and Torbay are part of Team Plymouth—in Cornwall, they sometimes like to call it “Team Tamar”—because we recognise that the skills base, transport needs and housing needs will not be met by one single council or place; it is a bigger thing.
We have worked hard knocking on the doors of lots of government departments. The leader of my council and I take every opportunity we can to make sure that the message is heard in all government departments. I think they all understand the message, but we would love to see an even more co-ordinated government approach to Team Plymouth. The MoD and MHCLG are absolutely alongside us, and the DfT is there, but there is much more we can do with other government departments.
We are one of four places in which the Treasury is testing a place-based business case. We really hope for good things from that. No money is attached to it at the moment; the Treasury is taking a different approach that says, “Can you tell your story once?” What often happens with bids is that we will make a bid about housing, and someone will say, “That’s really interesting but you haven’t got transport so we can’t deliver the housing”, and someone else will say, “Why would we do that transport? You haven’t got X, Y or Z”. The idea is that we produce one strategic business case for why investment in Plymouth is important and, if that moves forward, individual departmental business cases will hang off it. We have certainly had a lot of traction from the departments that have large capital spends. We are really keen to bring other government departments, particularly the DWP, into that work, because we know that, if we are to make sure that the life chances of everyone in our city and region are lifted, getting people into work and better jobs will be vital.
The Chair: A lot of what you are saying is about funding for the infrastructure and so on. You obviously know a lot of the SMEs. Are they finding that they can get money, either for the early stages or for scale-up?
Tracey Lee: It is important that the Office for Investment is working closely with our businesses. I would not say that it is easy for them to access the funding, but we have mechanisms to do that. One of the big issues for many of our businesses is waiting for the defence investment plan. I am sure that you take evidence from many businesses and have probably heard that a few times. Many businesses ask, “When?”, “What?”, “How?” and “How do we start to bid?” Businesses are not looking for handouts. That early-stage innovation, “test and grow”, is important, but very often it is about understanding the route through to bidding for contracts, whether that is prime contracts or contracts through supply chains. The sooner that can be settled, the sooner our businesses can get on and do that bidding.
Q79 Baroness Carberry of Muswell Hill: You have said a lot about skills already, so you have answered quite a lot of the questions that I was going to ask. It seems to me that the partnerships with the university and the college that you have described and the investment that Babcock has been prepared to make in leading your education strand are absolutely exemplary. But some of the smaller questions that still occur to me include the extent to which you will be able to prevent the big prime, Babcock, absorbing all the potentially skilled workforce, because it is able to grow its own, with the smaller companies being reliant on central government investment. Will your partnership be able to prevent that happening?
Also, we have heard from other places—it might not apply to Plymouth, so perhaps you can give us some reassurance—that young people at school who might be contemplating going into apprenticeships, or people leaving university, have said that, by and large, they are not encouraged to go into the defence industry. It might be different in Plymouth because it is a defence-focused city, but is that a factor that you have to take into account when you are talking about building the skills base?
Tracey Lee: Those are very pertinent questions. What we are doing in the skills environment is trying to create a whole system, and we are still in the foothills of that. One thing that we really need—I described it to our Team Plymouth board the other day—is a church spire totaliser for the 25,000 jobs that tracks how and what we are doing and where we are. We are looking at an observatory so that we can pin down whether we are making a difference. If we are not, we need to change course. We are absolutely at the foothills. The partnership is exemplary in the way in which we have set it up. Having a defence technical college and a defence university and really understanding the work that needs to happen are absolutely vital, but we are nowhere near where we need to be. Every day I have businesses in the city saying that their workforce is being poached. The pace at which we need to work has to accelerate.
Babcock is a key and important partner. I know that it genuinely recognises that dilemma of needing the workforce—it needs to fulfil its contracts and deliver—while every time the managing director comes into a meeting, he can be bombarded by people saying, “Why did you poach those people?” We are in that situation, and the only way out is to work together.
One of the things that we have been talking about is the fact that Babcock’s graduate and apprenticeship programmes are oversubscribed. There must be a way in which we can help, with a bureau, all those applying for apprenticeships and graduate placements, to get them into other businesses in the city. The way in which we use Babcock as the catalyst, if you like, for attracting people to the industry is really important. It is then about how they are fed out across the wider city. Every day we are facing those challenges.
In relation to the defence industries, you are right. The defence industry and security are in the city’s DNA. We have a nuclear dockyard in our city centre. We have to do an off-site test every three years to make sure that that nuclear licence is renewed. The city lives with an understanding of its dockyard, but it has a changing dynamic and demographic; people come into the city and move around. There have been questions about whether this is right, particularly about that sense of what defence means in practice. That is about talking through and people understanding what defence industries are about and, as I said earlier, what security industries are about. Even those who are not always in favour of defence would like their internet to work and a cable not to be cut. That dual-use technology is really important for the work that we are doing.
As a place, we do not want to be known as a dockyard. We are a vibrant city, and we have a huge amount going on. We have other industries in the city. Therefore, this is our golden opportunity and our Olympics, but, at the same time, we neglect everybody else and our other industries at our peril. Our cultural industries are growing, which is important. If we want people to relocate—people like a lovely environment to live in and they want things to do. Our museum has just won the national Museum of the Year Award, beating the V&A East Storehouse and the National Gallery. It was open five years ago. We knew that we needed to have cultural attractions. We wanted to be a city to which people could come and live, grow up and have really great things to do, and culture is very much at the heart of that.
Q80 Lord Camoys: The UK has various testing facilities for the marine defence sector—for example, the National Oceanography Centre in Southampton and the facilities in Blyth—but there is a genuine lack of access to end-to-end facilities to test and evaluate new defence capabilities. That is an acute problem particularly for the smaller defence companies, which cannot afford to fill in the gaps themselves, unlike the primes. How will Plymouth’s defence growth deal provide the testing facilities in Plymouth and in Plymouth Sound that the UK needs? What role will the council play in ensuring that there is sufficient end-to-end test and evaluation capacity?
Tracey Lee: That is absolutely key. For the defence growth deal, we have a notional allocation. The proposals for the deal are just being worked through at the moment. However, a big slug of that cash needs to go into developing the National Centre for Marine Autonomy to make sure both that we can connect the businesses together and that the testing facilities are right. Our university has an absolutely giant wave tank, which is great for the first-stage testing of kit. What businesses then need to do is to move out of the wave tank and into Plymouth Sound and test there. They then need to go out past the breakwater and start testing in a much trickier environment. All of that comes together.
On the sort of instrumentation we have, there is a lot of kit—we talk about the marine autonomy industry moving at pace, but the kit with which we need to test moves at pace. Therefore, creating a marine institution for autonomy is important, so that smaller businesses can access what they need. We have a big cluster of marine autonomy businesses at Turnchapel, which has water access. One of their latest purchases is a 3D printer. Some of it seems like quite basic stuff—I think they got the 3D printer from another place in the city—but some of the kit that they need in order to develop prototypes requires fast testing. All of that will come together as part of the defence growth deal. Very shortly, we will put in the submission to the MoD board that decides the allocation of that funding.
Lord Camoys: Do you come up against any regulatory issues with developing the testing facility in Plymouth Sound?
Tracey Lee: I am not an expert on regulation, but I know that our businesses do.
Lord Camoys: That is a common problem.
Tracey Lee: There are only small areas that they can test in. For a vessel to go out—whatever that vessel is—it should have life jackets, fire-suppressant kit and flares on board. I do not know who is going to let off a flare. That is a sense of what the regulation is about. Some of our testing vessels have to be towed, because they cannot be autonomous—they are not allowed to be by themselves. You will see them going out with another vessel in front, with something like a toddler rein-chain so that they can be attached. Therefore, we need some pragmatism about those regulations, as well as the safety concerns. I am a sailor, and I do not want to be run aground by an autonomous submarine because it is underwater, just doing its own thing and surfacing.
We have to make sure that it is done at pace and it is done safely, but we also have to take a few risks in this space if we are going to move at pace. Part of that is that, when our businesses look globally, they see other places that are testing this kit and starting to develop. If we want to maintain a position that is internationally significant in marine autonomy and move forward with that ability, the regulatory environment is very important.
We have been doing some work with the National Physical Laboratory because of the instrumentation and testing that is needed, as well as Lloyd’s Register. There are big opportunities to change maritime regulations. Maritime regulations are used all over the globe, so there are opportunities here, if we take them.
The Chair: If we have this testing unit, who will own it? Will it be the council?
Tracey Lee: It definitely will not be the council.
The Chair: If you own everything else, why not own the testing facility?
Tracey Lee: We will need to work this through. At the moment, the National Centre for Marine Autonomy is a whole system, but it has no firm base. It may be the case that the university owns it, but that is just because somebody has to own it. It owns a lot of the Smart Sound kit; there is a lot of kit there. There is also the freeport. We have bodies in the city that would be natural homes for those things. It sits alongside SALMO (Salvage and Marine Operations), the MoD testing system, so it is again important to work with the MoD on what it is doing.
Q81 Baroness Valentine: My question is about learning from other business sectors, but I will add some bits on either side of that. I do a lot of work in place regeneration, so there are a lot of things I could ask you about. I declare that I am an adviser to the Centre for Coastal Communities at the University of Plymouth University.
Let me ask another question before coming on to the question I am supposed to ask. I note your challenge about skills, which I deal with frequently. I am interested in the numbers, because you said that 25,000 new workers are needed. From just googling, in the whole of Cornwall there are only 7,000 NEETs and 100,000 under-18s. Therefore, this figure of 25,000 is not coming from Plymouth, from Cornwall, or from Cornwall and Devon. From the way you are talking about it, I cannot see how that feed-in is happening. It does not give me as much confidence as one might hope that a lot of government departments are involved somehow. I was also interested in the relationship between you and Cornwall in terms of governance hierarchy.
I will now turn to the question I was going to ask, which is about the lessons from the other sectors, and specifically for a local authority. I think that Preston City Council used to be very good at sourcing locally from SMEs; I do not know whether there is a lesson there. Is there a lesson from other sectors about how to support the tale of the SMEs? You mentioned the Olympics; are there lessons from how the Olympics supported the tale of the SMEs?
Tracey Lee: On SMEs and support, having the social value workstream is important. That is one of the things that we are really keen to do. In every defence contract, there is a paragraph to say what social value you will add. We love it when people sponsor a football kit, but we would much rather they put people on the governing bodies of schools or think about upskilling and how many local apprenticeships they are going to have. What we really want to do, and we are starting this work, is to create a menu where, if you are applying for a defence contract, here are some things that will sit above sponsoring a football kit—I mean, we love flowers on a roundabout too—but the things that are going to make a real difference to what we do. What is really important is how some of those bigger prime contractors can support some of the SMEs in doing that. What is it that those SMEs need? Do they need mentoring? Do they need support? Do they need a system where apprentices can work between them? How can that system be improved? There are ways in which we can encourage businesses to support each other, with those that are more prime helping those that perhaps need extra support. I am not sure if I have answered your question.
Baroness Valentine: I just wondered whether there were lessons from other sectors of exactly what you were talking about: how the Olympics had done it, how, I do not know, big energy projects had done it.
Tracey Lee: We love to be in a gang in Plymouth, we really do. We love to look up and out and say, “Who has done this?” So we are trying to work with other places, and the experience that we have in the south-west of Hinkley, what has happened with Hinkley Point and the development of the nuclear power station there, has been quite powerful, particularly in terms of how you bring those SMEs together and help support them to get ready for contracts. I know that Babcock is doing work to make sure that it is supporting the development of SMEs. Many of our SMEs in the city will still say, “We don’t know how to get a contract with one of the bigger organisations”. Of course, we all love a lot of paperwork, but many of those businesses are a few people, and if they are doing paperwork, they are not developing their business. Those are ways in which we can help. We learned a lot when we had the local enterprise partnership and through the work for Hinkley, so my economic development team has done a lot of work on that. I think that is a really fair point about learning from others.
Baroness Valentine: What about the skills numbers?
Tracey Lee: You are right: it is a really scary number. I think we have about 117,000 jobs in the city; we need 25,000 more. So these are really big numbers. It is only when you start to set that in the context about defence of the realm that you will see my point about why there are other places that have big growth trajectories, but ours is so mission-critical to the UK that we need everybody at the table, everybody saying, “What can I do to support this?”
Learning the lessons from other places where there is a significant, big investment, our primary job is to make sure that a £7.1 billion investment by the MoD is felt by the people of the city and felt by the people of the region. The first job will always be: “How do we make sure that people are feeling that difference by being in work, being in a better job, having a career—feeling that?” We cannot do that alone. We will not get 25,000 people to fill the labour jobs that we have from Plymouth, which is why the relationship with Cornwall, particularly south-east Cornwall, our relationship with Devon and our relationship with Torbay is so important. We have an MoU (Memorandum of Understanding) that the leaders of all four councils have signed, which is about working collectively on those skills development programmes, on the business support, and particularly the transport programmes and getting people to the jobs that that we know of.
In addition to that, there will be specialist recruitment. We know that we need to make the south-west the best and most attractive place it can be. That is why the regeneration of the city centre, creating the homes and environment, is really important. The work that we are doing to regenerate the city centre is vital. When people arrive and say, “Where am I living? What am I going to do?”, we have some great attractions. You can be on the water in 10 minutes. You can be on Dartmoor in 15 minutes. What we know is that the very heart of our city, regeneration and putting housing there, is vital for repositioning our city.
We have done a lot of work—again, collectively with our partners—on the brand, marketing us as a great place to be. That is all part of how you bring the whole system together to make the change and attract people. We need to get our graduates to stay. Like so many cities in the UK that have great universities, our graduates go off to the bright lights of other places. The graduate jobs are appearing and growing in the city. We want our grads to stay and have their careers with us.
The Chair: It was interesting that you mentioned transport earlier. I happen to know Cawsand well, but getting from there to Plymouth in time to start work is a challenge.
Tracey Lee: Yes.
Q82 Baroness Drake: I have just one final question. Your determination to succeed is clear from the evidence you are giving. A concluding question is about key learning. There are more deals to come, so can you give us your reflections on what could be improved in, first, the process, secondly, the engagement of the different parties and, thirdly, the decisions on funding that would improve the efficiency with which these growth deals could take place?
Tracey Lee: I think everybody in the partnership has that determination. While we have been doing this, we have sometimes thought that we have found a route to funding only for someone to say, “No, that’s not the route any more”. Sometimes it feels as though you are on an Army assault course: you go under the wire, over the big wall, use the rope to climb up, and then you get to the end, covered in mud and someone says, “That’s not the assault course you need to be on. You need to be on the Royal Marines one, over here”.
The route through has not been easy. The defence growth deal has in many ways changed that—saying that it is absolutely a defence mission to defend the nation and to grow defence industries has been really key. For nearly two years we were trying to navigate how we would get there, and then defence growth deals are part of the picture. That has been quite a game-changer.
In terms of the lessons that we have learned, we need to be in the thoughts and prayers of government departments all the time. There is a danger that we are ticked off a list, and with 25,000 jobs to cover in the next 10 years, we cannot be ticked off a list, because there is so much still to be done. We have to make sure that the system that is in place to connect places to government works and continues to deliver and that the other government departments are absolutely focused on mission-led government. That is really important. We are still waiting for some outcomes on housing and housing investment; we are hoping for announcements in September. The delays that happen just put us behind on the trajectory that we need to go on in order to change what we are doing.
The other lesson is that you have to work with a little bit of messiness. It will not be a neat process because the defence growth deal is crucial to what we are doing but there is other government funding, and other funding that comes through to us, so you have to deal with different owners and masters of the money. That is fine. If the DfT is going to fund a road, it is the master of that money for the road, not the MoD. The way in which it comes together in the place means that it joins up in one system, which is really important.
Looking back, two Government Ministers have been really positive and supportive. Some have changed over time, and I am not sure what is going to happen as a result of that. The pace at which the Government then get back up to speed with what needs to be done can be tricky. We have setbacks but will always say, “You’ll have to kill us, because if you wound us, we’re getting back up and coming again”. It is so important that we have that resilience because this is the thing that makes the difference for us and our communities. When I wake up in the morning, I definitely have to think about local government reorganisation (LGR), but this is the game-changer for us as a place and a region. It therefore has to be on our minds, and we would like it to be on everybody else’s minds too.
Lord Fuller: Is LGR going to take your eye off the ball on this?
Tracey Lee: No. Well, I hope not, anyway. That was a very firm no, and now I am going to retrench a bit. We have set up Team Plymouth so that it is absolutely about the triumvirate and about having partners that are equal in this. With local government reorganisation, Plymouth will be a new council with an expanded boundary of 13 parishes. There will be a lot of work to do across the system, but we have made sure that we have resourced that in the local government reorganisation bids that we have put in. One thing that we have learned is always really important, from the number of emergencies we have, is that when you are dealing with one issue, you have to make sure that the other issues are taken care of. No one thanks you afterwards if you turn your attention 100% in one direction and something else falls over. Resourcing that will be absolutely key.
From the point of view of local government reorganisation, the letter that we have had on that is very clear that the Government see the creation of four councils in Devon as a positive step for the next stage of devolution. On the question of what is next for us, we are working on moving forward, subject to our council agreeing to go into a combined authority with our colleagues in Devon and Torbay—our door is always open for Cornwall to come into that, but they have their own arrangements. That sense of what comes next for devolution will be very important for Team Plymouth and how the wider growth of the economy works. In many ways, LGR is absolutely vital. It is a step in making sure that we have a four-unitary system for Devon in which we are able to move that growth agenda forward.
The Chair: Mrs Lee, thank you very much for your time today. You said not long ago that you hoped that the £7 billion will really mean something for Plymouth. I have to say, looking from the UK, that we are really hoping that that £7 billion keeps us all safe and that you sleep well at night. It is clear from the role that you are playing that you then wake up and help keep the country safe. Please will you thank, on our behalf, your colleagues at the council for that, and for enabling you to come up today and share your experience with us? It is very valuable for our inquiry.
Tracey Lee: Thank you very much.
