New Frigate Order (Hansard, 23 January 1992)

§ The Earl of Arran
My Lords, with the leave of the House I shall now repeat a Statement being made in another place this afternoon by my right honourable friend the Secretary of State for Defence. The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a Statement on a further order for type 23 frigates.
"The type 23 frigate will form the backbone of the Royal Navy anti-submarine surface force in the future and is in addition a highly capable all-round warship. Four are already in service and six more are under construction. In June we invited tenders for up to three more frigates. The benefit of our competitive tendering policy was clearly shown in the extremely keen prices offered, which are significantly lower in real terms than previous ships. The benefits of privatisation of the yards, and the greatly improved productivity now, ensure better value for money for our own defence expenditure and help the yards themselves to compete once again overseas as the opportunities with Malaysia and Oman have shown.
"Before I turn to the outcome of the competition, I remind the House that the contract with the shipbuilder is for less than half the total estimated cost of the frigates. The larger part is made up by the host of specialised equipments that such a frigate contains. For some of these, contracts have yet to be awarded. But some are already known; for instance, the ships' 4.5 inch gun will be ordered from VSEL in Barrow, the machinery control equipment from Vosper Thornycroft in Porchester, the Vertical Launch Sea Wolf missiles from British Aerospace in Bristol. The four Spey gas turbine engines for each ship will be ordered from Rolls-Royce at Coventry, main gearing from GEC Rugby and diesel generators from Paxman Diesels at Colchester. The shipbuilder will itself also have many sub-contractors. Hundreds of firms across the United Kingdom, large and small, will benefit from this order over the next few years. 969 "Turning now to the results of the competition, I can tell the House that the tenders produced a winner by a very clear margin. We have accordingly decided to place a fixed-price contract for three type 23 frigates with Yarrow Shipbuilders on the Clyde. The construction of the first ship will start in the second half of this year. These ships will join the Duke class and will be named HMS "Somerset", HMS "Grafton" and HMS "Sutherland".
"This is very good news for Glasgow, and for Scotland as a whole. I recognise that it is, equally, a disappointment for the other yards that had tendered for the work, and for people in those areas. However, this type 23 order is but one part of a substantial on-going programme of vessels for the Royal Navy. This will include a new anti-air warfare frigate, a second batch of Trafalgar class submarines and other significant vessels to ensure that we maintain a modern and effective Navy in the future.
"This order brings to 13 the number of type 23 frigates ordered since 1984 and the number of vessels ordered for the Royal Navy since 1979 to seventy-one. It is yet more evidence that this Government are committed to ensuring the capability of the Royal Navy's surface fleet and to the wider aim of ensuring our forces of the future have the modern equipment that they need." My Lords, that completes the Statement.

§ Lord Williams of Elvel
My Lords, the House will be grateful to the Minister for repeating the Statement made in another place. We welcome the announcement that has been made. We are glad that the Government have decided to purchase three type 23s rather than possibly leave one on option, as it were. We also wish to congratulate Yarrow, the successful yard. As the noble Earl said, it is very good news for Glasgow and for Scotland.
In congratulating the successful yard, I hope that the noble Earl will accept that we must sympathise with the loser yards. There is an unanswered question about the know-how charge imposed on the loser yards in the tendering process, which we discussed at Question Time yesterday. I should like to ask him when the tendering process for the next batch of type 23 frigates will begin. What are the Government's long-term plans for that project? Will they discuss with our NATO allies the naval requirements and indeed naval strategy in the light of the collapse of the Soviet Union and its consequences?
Perhaps I may also ask the Minister whether the Defence White Paper which ensures, in its own words: sufficient warship building capacity to meet likely future defence requirements", was borne in mind when the contract was placed. If that commitment stands, can he explain what will happen to the loser yards and what plans the Government have to ensure that those yards will be able to remain in business as warship building yards in the future? Perhaps the noble Earl will confirm that, apart from what has been announced, the only 970 significant naval orders available until 1995 are the three type 23 frigates which are currently under order and that the tenders for the minehunter Sandown class have been shelved. Is that the case? Proposals to replace two rather old amphibious support craft and to construct an aviation support ship have been deferred, as have proposals for a further auxiliary oiler replenishment vessel.
In the light of that programme, is it the case, as some people in the industry feel, that there will not be room for more than two or at best three warship building yards by 1995–96? Is that the Government's impression and view? If so, what do the Government intend to do to ensure that those yards, which in their own right are extremely efficient, are helped to diversify out of warship building into civil and commercial ship building, and possibly other activities?
Having asked those questions, of which I gave the noble Earl prior notice, I again wish to emphasise that from these Benches we congratulate Yarrow and we are pleased for Scotland. We believe that this is a good decision, but we recognise that there are obligations on the Government to make sure that Tyneside, Merseyside and indeed Southampton are carefully looked after as a result of that decision.

§ Lord Mayhew
My Lords, I should like to ask the noble Earl, was the decision by the Government cleared in advance with our NATO allies? Does it link in with the United States' decision to reduce its naval strength by 4 per cent. to 5 per cent. a year over a great number of years? I hope that he knows the answer to that question already.
Does he recall that nearly three years ago the Government decided on a destroyer-frigate fleet of 40 ships? Is that still the target for the Government? Are the wartime tasks given to the fleet the same as they were three years ago? Has no adjustment at all been made for the break-up of the Soviet Union? Do not we now need a coherent long-term plan for the navy in the new circumstances?

§ The Earl of Arran
My Lords, I am grateful to the noble Lord, Lord Williams, for welcoming the final confirmation that three type 23s are to be ordered. I welcome his remarks about Yarrow and accept that at the same time other shipbuilding yards inevitably have to be disappointed.
With regard to future numbers of the type 23, certainly more type 23 frigates are planned after this order. We cannot comment on size or timing at this particular stage.
The noble Lord, Lord Williams, moved on to speak of our NATO requirement. In reply to him and also to the noble Lord, Lord Mayhew, as has been said many times in this House, the Government remain committed to a force level of about 40 destroyers and frigates.
The noble Lord, Lord Williams, asked, for instance, about single role minehunters. Certainly 971 further single role minehunters will be ordered but the size and timing of the order yet remain to be determined.
He then asked about auxiliary oilers replenishment. Again the size and timing of orders for further auxiliary oiler replenishment ships remain yet to be determined. The noble Lord then asked about the future of shipyards. He asked me really to speculate too much about that. However, yes, I can say that there is over-capacity in the warship building industry. The Ministry of Defence orders alone will not generate sufficient work to alter that position. Ship-builders really must seek other markets in addition to the Ministry of Defence work. As the warship programme is slimmed, and with completion of the main Trident submarine build, some contraction of the industry seems likely.
As regards the workforce, it has always been the Government's view that it is the decision of the defence industries, the shipbuilding yards themselves, to make their own way forward, to make their own decisions in line with their directors and their shareholders. We do not regard it as the Government's job to interfere with that.
As regards the questions of the noble Lord, Lord Mayhew, yes, the situation has been notified to our NATO allies. Of course the final commitment, as I have already said, of about 40 destroyers and frigates is well known by our NATO allies. All that is taken into consideration as regards the future planning of the Royal Navy and its capability.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that many people believe it extremely sensible to award all three contracts for those frigates to the same builders inasmuch as it must be economical and efficient whatever disappointment the decision causes to other yards? However, will my noble friend state the Government policy on maintaining in potential operation other shipyards which can construct warships? It would obviously be dangerous to allow the number of suitable shipyards to be reduced too far. Have the Government a policy on a minimum provision of that kind?
The noble Earl referred to 40 frigates and destroyers, and certain other craft. Have the Government in mind in due course to replace one or more of the three by now ageing aircraft carriers now serving in the Royal Navy? I believe that they have some years of operational life ahead but they are a type of ship which does not necessarily age well. I shall be interested to know whether the Government have in mind the idea of replacing aircraft carriers too.

§ The Earl of Arran
My Lords, first I understand and indeed appreciate the remarks of my noble friend concerning the economical efficiency of placing all the orders in the same shipyard. Of course that is very evident; that is why we have done it.
As regards the number of shipbuilding yards in the future, we talk at all times to defence industries on the procurement side and give them as far ahead as possible as much notification as we can of our future 972 requirements. Therefore as regards the number of shipyards in the future, it is a hypothetical question to ask, but we are aware of it. As I said to the noble Lord, Lord Williams, after we have informed the shipbuilding industry as much as possible it is up to the companies themselves to determine their own future.
The noble Lord, Lord Boyd-Carpenter, asked about aircraft carriers. I cannot answer that point at this time. However, I understand it well. I shall write to the noble Lord to see whether I can be more enlightening.

§ Lord Dormand of Easington
My Lords, the Minister has very properly expressed sympathy with those yards which have not on this occasion obtained an order. However, I am sure that he will bear in mind the point made by my noble friend Lord Williams that the need in all such yards is as great as ever. He will not be surprised to hear me mention Tyneside which has an absolutely first class record of shipbuilding of all kinds. It is an area where unemployment remains the highest in the United Kingdom outside northern Ireland. While stressing the unemployment aspect, on this occasion one has to stress the sheer expertise and dedication in that area when considering such projects. At this stage will the noble Earl go a little further? Is anything being considered for other yards without a decision having been taken?

§ The Earl of Arran
My Lords, I cannot say at this moment whether there is anything in the pipeline or whether decisions are about to be taken on other yards. The noble Lord is quite right to say that in this field in this decision there are bound to be winners and losers. The losers will be very disappointed. Of course they have one of the finest reputations in the country as a shipbuilding yard. As regards the future, I have to say again because of that we are very aware of the difficulties of some of the yards. We talk regularly to those yards about the future.

§ Lord Glenarthur
My Lords, with the announcement following so hard on the heels of my Question on the same subject yesterday, will my noble friend accept from me that it is extremely good news for Yarrow, for the subcontractors to which he has referred, for Clydeside and indeed for Scotland, coming as close as it does to the recent announcement about Ravenscraig? I do not in any sense gloat over yards such as those to which the noble Lord, Lord Dormand, referred which have not been so fortunate with this order. They all tried extremely hard. I am sure my noble friend will recognise that this order will preserve jobs, create others and possibly enhance the prospects for further jobs if orders from abroad come to fruition.
Having given the dates for the start of the construction programme, will my noble friend give an indication when the three frigates are likely to be completed?

§ The Earl of Arran
My Lords, the intention is that the three frigates will come into service in the second half of this decade. I take the point of my noble friend with reference to Ravenscraig. Of course there is 973 absolutely no connection with the Ravenscraig announcement. Clearly what I have announced is welcome news for Scotland.

§ Lord Hutchinson of Lullington
My Lords, perhaps I may ask the noble Earl a question on the armaments of the destroyers. Will they be fitted with some effective answer to the Exocet missile? It became perfectly clear in the Falklands War and the Gulf War that ships were being sent to sea without an appropriate answer to that missile. The noble Earl has spoken about the navy having the most efficient and up-to-date armaments. I ask the question as one who was sunk in 1941 in the most modern destroyer then built, when the ship had no answer whatever to the Stuka bomber which was effective at that time. Ships were then sent to sea without the answer to hostile attack armament. Will provision be made for those destroyers to be sent to sea with an effective answer to the Exocet type missile?

§ The Earl of Arran
My Lords, I am almost certain that I am right in saying that the type 23 frigate will have a very clearly defined Exocet defensive system. It will be fitted with the harpoon anti-surface ship missile and will provide an all round surface warfare and naval gunfire support capability. Certainly air defence will be provided by the vertical launch Sea Wolf system.

§ Lord Monkswell
My Lords, I share the welcome from all sides of the House on the placing of the order. However, there is concern from all sides of the House about the capacity of the shipbuilding industry to build warships in the future. We must also be cognisant of the ability of our shipyards to build merchant vessels.
I wish to ask two specific questions. First, did the Government ask the firms involved what effect placing the orders would have on employment or unemployment in their localities? Secondly, will the three frigates that have been ordered be built in parallel or in sequence? Will they be built at the same time or one after the other? We are in the midst of one of the longest running recessions to which this country has been subjected since the war. The building of the frigates presents an opportunity to provide employment and to inject economic activity into the country at this time of recession. If the warships were built in parallel—that is, all at the same time in different yards —rather than as I suspect in series, one after the other in one yard, we should have the opportunity of preventing the continued rise in unemployment.

§ The Earl of Arran
My Lords, I am almost certain that they will be built in series, one after the other. If I happen to be wrong or incorrect on that point I shall certainly advise the noble Lord. When he stresses again the importance of the future of the shipyards, yes, he is right. I have already said several times that it is up to the shipyards themselves to decide their future. Every consideration was taken into account before placing the order with Yarrow but its price was 974 significantly less than other shipbuilders. At the end of the day it all comes down to a question of value for money, and that is what the taxpayer has to pay for.

§ Lord Lyell
My Lords, will my noble friend accept that many of us on these Benches were delighted to hear the news that he has announced? I am sure that the Royal Navy will also be delighted with the quality of the ships that were previously built at Yarrow. No doubt that quality will continue with the present order. Three vital words appeared in my noble friend's Statement. He said that it was by a "very clear margin" that Yarrow won the contract. Will he confirm, perhaps not today but in writing, that the rules referred to by the noble Lord, Lord Williams, and the know-how payments are part of the tendering process for such contracts? Is it right that before any of the yards competing for the orders took part in the process they were informed of the rules? Will my noble friend also confirm that, in spite of all the rules, Yarrow won the contract on quality, delivery and value for money by a very clear margin?

§ The Earl of Arran
My Lords, I think that I have already indicated that that is indeed the case. I have said that several times. As regards the actual terms of the contract—we do not normally publish what exactly are the terms of a contract other than to those who are competing—certain specifications were made very clear to the builders.

§ Viscount Allenby of Megiddo
My Lords, on behalf of Members on these Benches, I too welcome the announcement of the new orders being placed. It will be a tremendous boost to Yarrow. Will the Minister kindly confirm that the earlier ships in the line will be updated to the same specification as the new ships? The noble Lord, Lord Williams of Elvel, referred to LPDs; that is HMS "Fearless" and HMS "Intrepid". I did not hear an answer from the Minister. I know that the matter has been put on hold, but I must point out that those ships have been in service for more than 25 years and are a considerable worry to the Royal Navy. Will the Minister now or in the future indicate when a decision is likely on that type of ship?

§ The Earl of Arran
My Lords, certainly as regards the LPDs a project definition phase for the replacement of HMS "Fearless" and HMS "Intrepid" is under way, with some study contracts let and more to follow. Indeed, the decision on the ship orders will follow the assessment of the outcome of the project definition phase.

§ Lord Mayhew
My Lords, I warmly endorse the tributes paid to Yarrow. Does the Minister not find it strange that during the past three years the Government have not reassessed in any way the role or size of the frigate fleet? Does that mean that there will never be such a reassessment, or are they waiting for something more important and relevant to happen than the break-up of the Soviet Union?

§ The Earl of Arran
My Lords, I find that a somewhat strange question. We have made continually clear time after time that we have taken a long, hard and strategic look across the whole of the world. 975 In view of that we have said that we are committed to a force level of about 40 destroyers and frigates. Prior to our paper entitled Options for Change it was about 50.