Last November, the government published its much anticipated industrial strategy. It was long on words, but extremely short on specific commitments to lay the basis for a prosperous country. One of the most significant omissions from the 254 page document was any reference to Britain’s defence sector, even though this sector is of enormous actual and potential importance.
The reason for this omission was, I am told, because the Ministry of Defence (MoD) intended to publish a ‘refresh’ of its defence industrial policy. This came out just before Christmas, but only complemented the earlier publication in that it was equally vacuous.
For the government, Britain’s defence industry is increasingly seen as being somehow divorced from the wider British economy. Failing to even mention Britain’s defence sector in its broader industrial strategy didn’t happen by accident; it is indicative of a deeply entrenched structural mind set.
Labour, on the other hand, recognises the importance of the defence sector to the industrial base of this country. In this sector 142,000 people are employed directly and many more through the supply chains, and there is a £23bn annual turnover.
And yet, this sector is being wilfully eroded by this government. Not only is there a failure to invest in skills and training and sufficient research and development, the Tories are increasingly adopting an ‘off the shelf’ military purchasing policy, which is weakening the UK’s ability to develop and produce its own defence equipment.
Over the past few years, the coalition government and then the Conservative government have decided on a number of extremely significant purchases from the United States of America. These have included 2,747 joint light tactical vehicles, 9 maritime patrol aircraft, 50 Apache helicopters and, largest of all, the government has agreed to buy up to 138 F-35 fighter aircraft from Lockheed Martin. These aircraft will be based on the two new aircraft carriers and will be central to the RAF’s future capability.
The size and significance of these purchases should not be underestimated. The purchases are enormously expensive and because of the falling value of the pound against the dollar, they go a long way to explain why the MoD faces a black hole of £30bn. And crucially, as a recent House of Commons defence select committee report states, these purchases do hardly anything to benefit Britain’s skills base and our ‘sovereign capability’.
At the very least, these contracts should contain a significant British manufacturing element. But I would go further by arguing that this growing reliance on US equipment runs the very real risk of eroding a significant part of the country’s skills base and undermining Britain’s ability to produce military equipment in the future. This is because the skills in the defence sector are often of a high calibre and once those skills are lost to the sector, it is extremely difficult to replace them.
Rather than become ever more reliant on the US, a much greater emphasis needs to be placed on collaborative projects, especially with other European nations. This presents a very real challenge given Brexit, but the success of Typhoon and the Airbus A400M aircraft points us in the direction of relationships which allow the UK to maintain significant sovereign control.
Also, there is a need to review the effectiveness of the Single Source Regulations Office (SSRO), which is supposed to regulate the government’s ‘single source’ equipment purchasing. It cannot be right that the Government is able to avoid scrutiny of many of its contracts when the Single Source Regulations Office has within its remit only 15-20 per cent of single source defence contracts.
Central to Labour’s approach to an effective industrial policy for the defence industry is the redefinition of what is meant by ‘value for money’. One of the huge problems with the government’s definition is that it pretends that the MoD and its budget is somehow physically separated from the rest of the British economy. Instead of looking at what is the cheapest option for the MoD in the short term, consideration should be given to other factors as well. These must include a consideration of the employment, industrial and economic implications of any investment. As Unite the union has correctly argued, when investment is made by the MoD, money is returned to the government through taxation, and the Royal United Services Institute (RUSI) has calculated that for every £1 spent, up to 35 per cent comes back to the government. At the same time, workers in those industries contribute to their local economies and therefore there is a further multiplier effect.
Defence procurement has the potential for not only enhancing Britain’s sovereign capability in defence terms, it also has the potential to be a transformative agent in a dynamic regional policy and an effective means to enhance the country’s industrial base. Labour therefore believes that a strong defence industrial policy must be an integral part of Britain’s broader industrial strategy. The old demarcations between government departments need to be put to one side; the future demands that all parts of government, including the MoD, make a very real contribution towards Britain’s prosperity.