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Defence Spending — [Mr Clive Betts in the Chair]

Part of the debate – in Westminster Hall at 10:21 am on 16th July 2019.

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Photo of Paul Sweeney Paul Sweeney Shadow Minister (Scotland) 10:21 am, 16th July 2019

Thank you, Mr Betts, for calling me to speak. It is a pleasure to do so in this debate, which was ably introduced by the hon. Member for Berwick-upon-Tweed (Anne- Marie Trevelyan).

The figures are stark. Certainly in my lifetime, over the past 30 years, the defence budget has halved as a percentage of GDP. During the austerity programme in the UK over the past decade alone, it has in effect been cut by a quarter. Furthermore, looping in additional spending items such as pensions, as alluded to previously, is fanciful in the extreme as a way to save us from embarrassment by padding out the defence budget. It is certainly not reflected in operational capability, which is at the core of what the budget should be a measure of. Nor was I particularly enamoured of the claims by the possible successors to the Prime Minister of their commitment to defence spending. Even the most extravagant proposal will only return defence spending to the level under the previous Labour Government when it left office in 2010, at 2.5% of GDP. That is not a dramatic transformation of the defence budget, because even then defence faced significant resourcing challenges.

One of the biggest aspects of defence expenditure—and the measures applied to it by the Treasury—to have a deleterious effect on operational capability is multi-use and generational spending, as alluded to by the hon. Lady. That was a critical part of Sir John Parker’s report which, unfortunately, did not make it into the final national shipbuilding strategy—I wonder why. The critical piece of advice, or observation, on the failure of existing capital programmes was to do with the lack of an assured capital budget, as well as a lack of a grip on design trade-offs at an early stage in the programme. Crucially, the advice was not incorporated into the national shipbuilding strategy, and that will lead to significant increases in programme inefficiency.

The Ministry of Defence itself has calculated that an increase of 1% in the delay to programme time leads to a 0.38% increase in programme cost. Why then, for the sake of balancing the budget in year, was the Type 26 frigate programme’s drumbeat increased from 18 months to 24 months—a 33% increase? By my calculations, that leads to a baseline increase of 7% in the overall programme cost over that time. That does not include the fact that it also militated against investment in the capital infrastructure that would have delivered an upper-quartile shipbuilding industry in the UK—“upper quartile” refers to being benchmarked against other shipyards around the world. Getting our processes and methods correct—world-class—was militated against by the need to balance in-year budgets. That acted further against increased efficiency, throughput and, ultimately, combat effectiveness, and against the increased size of the Royal Navy.

That is the ultimate absurdity in the vicious cycle perpetuated by the existing funding model. That is why I welcome the Labour party’s commitment to tear up the Green Book, because it is thoroughly unfit for purpose when it comes to major defence equipment programmes. We therefore need a thorough review of how we ensure assured capital budgets for major defence procurement programmes. I hope that the Minister will allude to how the Type 26 programme’s increase from 18 to 24 months is an effective use of public money.

Also, why are this Government not invested in the upper-quartile shipbuilding facilities necessary to further maximum benefit to this country from the Type 26 programme? We have already seen its huge export success. Furthermore, the Australians and Canadians are investing in upper-quartile facilities, but the UK is not. That is a sad indictment of a failure of the investment cycle in UK defence procurement. The Government need to get a grip on that and to sort it out quickly. Moreover, Sir John Parker’s report is not reflected in the national shipbuilding strategy, and I encourage the Minister to consider that critical and glaring omission, and to incorporate it into revisions of the national shipbuilding strategy to ensure that we maximise the impact of our defence budget on operational capability.