By contrast, putting order out to international tender could cost shipbuilding jobs and prosperity, warns union.
GMB, the shipbuilding union, has revealed that the Ministry of Defence would not be liable to pay any compensation if Ministers changed their policy and kept a £1 billion order for up to three new military support ships in the UK.
GMB say that their research shows if the much-needed new Fleet Solid Support ships were built in British shipyards around 6,700 jobs would be created, and £285 million pumped back to the exchequer through income tax, national insurance contributions and lower welfare payments.
A new written answer from the Defence Procurement Minister, Guto Bebb, has revealed there is no threat of any compensation payments to non-UK companies if Ministers changed their policy.
The House of Commons is today set to debate a Labour motion which ‘calls on the Government to make the competition for the Fleet Solid Support ships contract a UK-only competition to maximise the return on that contract.’
Ross Murdoch, GMB National Officer, said:
“This written statement proves what GMB has been saying for some time – there is no reason for the Government to punt this lucrative contract overseas.
Keeping this contract in the UK would cost Ministers nothing – but putting it out to international tender could impose a severe cost on shipbuilding workers and their communities – particularly as we are already witnessing significant job losses at UK shipyards as the Carrier programme runs down.
GMB’s campaign is for this £1billion contact to stay in the UK, creating jobs and wealth for our county, including in the steel industry. Parliament should back and respect Labour’s motion today to keep this crucial order in the UK.”
Recently, the First Minister of Scotland stated that the international tendering for auxiliary vessel contracts is a betrayal for the Clyde, despite the yards having no interest in them, having never been promised them and the fact the vessels couldn’t physically fit on the slipway.
Speaking during First Minister’s Questions, she said:
“That work should be on the Clyde, I argue that that work was promised to the Clyde and should definitely go to the Clyde. We should be very clear. What we are now seeing develop around that work and the future of the shipyards is nothing short of a blatant betrayal of Scottish shipyards. During the referendum, promises were made to those shipyards by the Tories, and indeed, by all the unionist parties—the shipyards were told of promises of work for years to come.
The unionist parties specifically said that, if Scotland became independent, it would not be able to secure that work for the Clyde, because contracts could not go to “foreign countries. It is an absolute betrayal and I hope that we will hear all parties across the parliament stand up for shipbuilding on the Clyde.”
Sturgeon said the move was an “absolute betrayal” in light of promises made in the run-up to 2014’s independence vote. In fact, what was “promised” before the referendum was work on complex warships, like frigates and destroyers. There are three key problems with this:
- The Clyde is at capacity with the River class and Type 26 Frigate builds and has no intention of bidding for this work.
- The 40,000 tonne support vessels wouldn’t physically fit on the slip alongside the Type 26 Frigate builds.
- The only vessels “promised” were warships, such as frigates and destroyers.
Many, including some who work at the yards, have been surprised by these claims too:
having jut done a poll of those within ear shot of my desk, where we build complex warships on the clyde…not one person is outraged by ships we did not want, not being given to us. we are busy enough already thank you very much (this is my opinion and not that of my employer)
— Distant Smoke (@distant_smoke) April 20, 2018
They were never promised. The promise was for 13 type 26’s and a frigate factory. That promise has been broken (5 T26 replaced with 5 T31, and no frigate factory) if you want to complain that the Scottish have been betrayed, focus on those, not the MARS ships.
— Snowy (@PoliticalTeacup) April 20, 2018
When a friend of mine worked at BAE in Scotstoun he was tasked with carrying out the maths that showed that on launch HMS Diamond would not ram into @intuBraehead. On the day she stopped short by 6 inches. Current RFA Solid Support ships are 30m longer than Diamond. FYI.
— Ron Kane (@ka8895) April 19, 2018
We spoke to a contact at the yard who told us:
“This is the second time this news has popped up and I have no idea why the government in Edinburgh are making these claims, these vessels were not promised to us and they’re not warships. We’re busy with the last batch of River class ships and the first batch of the City class ships. If I had one message for them, it would be to stop using us a political football, we’re sick of it.”
Sorry, There was no “promise” on non-complex military ships (which can’t be made on the Upper Clyde anyway, no room). I can see why unions continue to be miffed but we’re confusing apples and oranges here.
— David Leask (@LeaskyHT) April 19, 2018
The MARS Solid Support Ships are not complex warships and as such, according to the National Shipbuilding Strategy, can be tendered overseas. According to the document, there are three tenets regarding UK shipbuilding policy that impact on the build location of contracts:
- For reasons of national security, all Royal Navy warships (destroyers, frigates and aircraft carriers) will continue to have a UK-owned design, and, will be built and integrated in the UK. Warship build will be via competition between UK shipyards. But international partners will be encouraged to work with UK shipyards and other providers to produce the best possible commercial solution.
- All other naval ships should be subject to open competition (provided that there are no compelling national security reasons to constrain a particular procurement to national providers). Integration of sensitive UK-specific systems will be done in the UK, where possible after competition between UK providers.
- Defence will take account of wider factors (including the impact on UK prosperity) when making these procurement decisions.
Even an SNP produced “Fact check” seems to conflate these auxiliary vessels with warships when discussing orders on the Clyde.
“Now, the order for the additional general purpose frigates could go elsewhere too. In fact, a new £1 billion order for three Royal Fleet Auxiliary ships is already going out to full international tender. This is despite UK government claims in 2012 that, “No British warship has been built in a foreign country for the last 50 years and we do not intend to start doing that now.”
Up to a point. No pointed out the RN has never built fighting ships in “foreign” yards. Yes said ‘Look at RN tankers built in Korea!’ No replied, ‘Those aren’t fighting ships’. Yes: ‘So you’re saying there’s a chance that work would come to the Clyde?’ No.
— alexmassie (@alexmassie) April 19, 2018
These are not warships, they were never promised to the Clyde and the Clyde can’t build them. What is happening however, where the real outrage should be, is that the unions are advocating that the build stay in the UK, not that it be done on the Clyde and this is something we agree with. There are strong arguments to build these ships in the UK.
Jude Brimble, GMB National Secretary, said:
“The Royal Fleet Auxiliary contracts are the key to unlocking the country’s massive shipbuilding potential. But Ministers refusal to put the UK’s interests first will mean that instead of a massive programme of shared economic and employment re-distribution, our firms will be competing against each other for slivers of complex warship work. It beggars belief that the Government wants to give this golden opportunity away to foreign competitors when working class communities up and down the country are crying out for decent work.”
Unions are demanding the vessels are built in the UK, as seeking an international tender “undermines the national interest” however none of them are advocating for the 40,000 tonne support vessels be built on the Clyde which is expected to be at capacity until into the 2030’s, long after the date the vessels will be required.
The Strategic Defence and Security Review 2015 confirmed that three new large Military Afloat Reach and Sustainability (MARS) Solid Support Ships would be acquired for the Royal Fleet Auxiliary, to replace the single-hulled RFA Fort Victoria, which entered service in 1994, and RFA Fort Rosalie and RFA Fort Austin (both dating from the late 1970s). The Solid Support Ship is designed to carry a wide range of stores to support other ships with ammunition, food and explosives to replenish naval ships at sea.
They will have extensive aviation facilities, with 2 flight decks, one at the stern and one spot on top of the hanger. They will have the ability to to replenish at sea via 6 replenishment stations, three on each side as well as using helicopters for vertical replenishment.
The Government’s procurement plans for the new support ships for the Royal Fleet Auxiliary are also facing opposition from Labour, the SNP and trade unions.
According to a briefing paper in the House of Commons library released today, the programme is currently in the Assessment Phase with the competition expected to be formally launched towards the end of 2018 and a contract signed in 2020. The MOD says the contract will be for two ships with an option for a third.
The briefing paper states:
“The Government intends to compete the contract internationally. Labour, the SNP and the shipbuilding trade unions argue the contract should be restricted to UK shipyards to support the shipbuilding industry, secure jobs and retain skills.
They argue the proposed ships are ‘warships’ and as such, the Government can use the Article 346 exemption to exclude the contract from EU procurement rules on national security grounds.
The Government disagrees, defining warships as ‘destroyers, frigates and aircraft carriers’, and says all other surface vessels should be subject to open competition.”
Two major unions, GMB and the Confederation of Shipbuilding and Engineering Unions (CSEU), have published reports outlining why they believe the ships should be classified as warships and why they should be competed domestically:
According to the briefing paper, the Unions’ arguments can be summarised as:
- The FSS should be seen as warships. They are armed and take part in counter-piracy and counter-narcotic missions;
- The Government’s commitment to revitalising domestic naval shipbuilding (as espoused in the National Shipbuilding Strategy) will only be achievable with a steady stream of orders;
- Building the FSS in the UK will help protect the UK shipbuilding industry, protect jobs and retain skills: GMB estimates up to 6,500 jobs could be created or secured, including 1,805 shipyard jobs;
- Rosyth shipyard will have a gap between the completion of HMS Prince of Wales (the second aircraft carrier) in 2019 and the expected refit of HMS Queen Elizabeth (the first aircraft carrier) in 2030, and FSS work could keep the shipyard operational in between these dates;
- The UK will financially benefit from returns to the Treasury in the form of taxes and national insurance contributions and lower welfare payments: GMB estimates £285m of the estimated £1bn contract could be returned to taxpayers this way; CSEU estimates 20% of the contract cost could be returned to the Treasury;
- The Government should factor in the revenue that could be returned to the Treasury when scoring bids between domestic suppliers and foreign competitors;
- There isn’t a level playing field as, the CSEU argues, “many foreign yards are either state owned, or receive significant direct or indirect subsidy… UK yards do not benefit in this way and are therefore at an unfair disadvantage.”
The TUC has also assessed the Article 346 exemption argument and argues the Government “has the sole right to determine” what its essential national security interests are. The TUC claims “other European nations have used the exemption to place orders for similar support ships with their own shipyards since the Directive was introduced”.
What is Article 346?
EU law requires most government contracts to be procured via an open, competitive process. The main EU legislation in the defence domain is the Defence and Security Directive 2009/81/EC, transposed into UK law by Defence and Security Public Contracts Regulations 2011.13
However, Article 346 of the Treaty on the Functioning of the European Union (TFEU) provides for an exemption to the procurement rules where a country considers it to be necessary for national security reasons: “any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material”. Article 346 refers to a list drawn up in 1958 by the Council of Ministers of products to which the provisions
The briefing paper also states:
“While their primary purpose is to replenish Royal Navy vessels, the RFA also provides operational support including for counter-piracy and counter-terrorism missions. RFA vessels may embark Royal Marines and/or helicopters and work with allies (e.g. the US Navy in the Caribbean) on these operations. RFA Fort Victoria, for example, was involved in joint US/UK counter-narcotic operation in the Gulf which resulted in the seizure of £40m of heroin in March 2017, while a Sea King helicopter crew on RFA Fort Rosalie helped guide an Australian Frigate to a suspicious dhow carrying over £100m worth of drugs in the Indian Ocean earlier this year.”
December this year will see the formal issue of documentation inviting bids for the design and build contract and in 2020, the contract for design and build is to be awarded.