Select Committee on Defence Minutes of Evidence


Examination of Witnesses (Questions 20 - 39)

THURSDAY 25 APRIL 2002

SIR ROBERT WALMSLEY AND MR JOHN COLES

  20. If you are prepared to order the six you do not foresee a problem. Why not go the whole hog for the 12?
  (Sir Robert Walmsley) It is a balance. I feel very comfortable with six. I feel very comfortable with the productivity that we will get on ship seven onwards. I feel very comfortable that the economies of scale that we have on the equipment production by going for six are very sensibly close to those we would get for 12, but it is not as good. I accept that, but we now have the flexibility. We will decide when we order the second six. We will decide what the modification state of the radars etc., is for the equipment and whether we want a different sonar or not. If we had gone for all 12, all that wold be locked up now. I think the last ship comes off in 2014. That is a long time ahead. I do not like predicting the future with that much certainty.

Chairman

  21. It is 12 years to cut from 12 to 10 to 9 to 8. I have been in this Parliament when we had 75 frigates and destroyers. Then we had Mr Mottram's famous "about 50" which was 43. Then 35; now 32. Are you confident that you have been given instructions by the Treasury or Mr Hoon that we are not going to go down below 32? My concern is, by only going for six, you are giving the government the flexibility for saying, "We are not going for another six. We are perfectly happy with the wonderful six that we have constructed."
  (Sir Robert Walmsley) Of course that is a theoretical possibility. The truth is that we do have a budget for all 12 ships. There is a very sound operational case for all 12 ships. I know you are speaking to Air Marshal Sir Jock Stirrup in a week's time and I am coming back with the Minister on 8 May when you will wish to go into the operational factors which have conditioned our confidence in the justification for 12 ships. The requirement is there. All we see in operations tells me that powerful escorts capable of protecting lightly armed or unarmed ships are absolutely relevant to what the Royal Navy does today. That is other people's business now, more's the pity.

  22. You will have retired by the time that crisis comes along. You can see my cynicism. You say the requirement is certainly there and the budget is there to sustain a further six?
  (Sir Robert Walmsley) The budget is there now. Nothing I have said should suggest that the Ministry of Defence has not set aside in the budget the funds for 12 ships, but it is still looking a mighty long way ahead.

Patrick Mercer

  23. What is the RAND study's longer term prognosis for the UK warship building industry?
  (Sir Robert Walmsley) It will be related to the demand for warships. I come back to my export point. If we are successful in the export field, we can have a terrific warship building industry, including submarines. That requires having designs that are attractive. It is not just about whether we have workmen and facilities and management capable of crashing out a ship at an economic price. It has to be a design that people want to buy and that is as true about merchant ships as it is about warships. The first factor is that exports will condition it but RAND were particularly looking at our own warship demand. They saw the over-capacity we have talked about. Beyond about 2009, as the carrier construction starts to increase and probably a new class of escorts called future surface combatants starts to get underway, we do see a definite rise in the requirement for labour in the shipyards. None of these predictions is ever quite as accurate as the lines drawn on pieces of paper would indicate, but by 2007 or 2008. Then it builds up as Type 45 continues. RAND's prognosis of all that is, Ministry of Defence, you had better be very careful to understand how you generate innovation in an industry if you do not have competition. That is what we are turning our minds to.

  24. Currently, it seems that there is over-capacity in the shipyards and that by the end of the decade there is going to be under-capacity. Can you give a little more detail about that and talk about the depth and the breadth of the lean times?
  (Sir Robert Walmsley) In terms of capacity, it is very strictly a labour issue. I absolutely guarantee there will be some cranage associated with putting things on the top of the island of an aircraft carrier and, with a bit of luck, we will hire those cranes in, so it will not be a question of building some huge crane in some lonely drydock somewhere. There are very few issues relating to facilities other than modernising. You can always do welding quicker and we should be ready to sustain shipyards, to put in more modern welding equipment. Competition stimulates that. That is the sort of innovation you get from competition. We should be ready to let that be reflected in the price of anything we buy as a single source contract. Particularly after the Type 45 investment in Portsmouth, facilities I sort of set to one side on capacity. The question then is can the shipyards provide the skilled labour. You cannot just recruit anybody. They have to be people who know how to do this stuff. We have learned that recently, when people just assume they are numbers. They are not numbers; they are skilled workers.

  25. We were in Faslane recently and this very point came across to a lubber like me.
  (Sir Robert Walmsley) I do not think I quite understood it as well five years ago as I do now. For as long as I can remember, we have been dealing with over-capacity in shipyards. The problem has not been shortage of labour; the problem has been shortage of orders to sustain the shipyards. As we look ahead towards the end of the decade, I have been hugely encouraged. Mr Kroese has already had this morning a bouquet from two of us. He has apprentices working at Swan Hunter now. People in the shipyards are laying down the foundations, I believe, to sustain and expand a skilled workforce towards the end of the decade. I will be very surprised indeed if that is not going to be possible.

Mr Jones

  26. On Tyneside, the average age of welders is in the early forties and that is because of the gap in the eighties when people left the industry. The other problem the north east has is if you get on a plane on Monday morning to Amsterdam or Brussels you will find quite a lot of welders travelling to Europe. There is competition for their skills now from across Europe, which creates problems in terms of recruitment of skilled welders, for example, and platers in Swan Hunter and other places. The same would apply in Scotland as well. I accept what has happened in terms of apprentices but do you not accept that part of the government's thinking is to put some thinking into how we generate these skills, not just in the north east but in other areas as well like Barrow, because a lot of companies have not been taking on apprentices or training people for a long time.
  (Sir Robert Walmsley) Most people in this room are probably parents of one sort or another and they know, when advising people to go into careers or not, they look to see if it is a long term career with real prospects. The long term orders for the Type 45 must encourage people to join the companies, because I absolutely agree with the thesis that we need young people coming in. From what I read in the newspapers, nobody can be unaware of this: the government has undertaken an enormous effort on improving the skill base of British youth. I am quite confident that the government understands the issue. If the work is there we will get the people. That is why these long term contracts are such a help because they give people the idea that this is an industry that is going somewhere. If we do not use as a nation the opportunity presented by our warship building programme over the next ten years in order to present designs that are attractive to other countries, we will only have ourselves to blame for what happens to the warship building industry in the next decade after that. It is a great opportunity we have.

  27. You emphasise this idea of skills to companies as well?
  (Sir Robert Walmsley) I do. I know Barrow quite well. I will not say I have a soft spot for it because I was born in Scotland. When you go round a shipyard like that, you are meeting people building parts of a submarine and they have done it six times over. They know what the difficulties are. It is not always about the drawings and you cannot just tell people to go and do it. They have to know. That is why looking after the skill base matters.

Chairman

  28. Following the RAND study, will there be a warship building/ship repairing strategy or is the RAND study the basis for a document which at least people can read to see what may be in store for them; that there is going to be a degree of rationalisation and unless they get their acts together there is little prospect of competing successfully? Can we expect such a document?
  (Sir Robert Walmsley) I would be getting a bit ahead of myself if I said you could expect such a document. The RAND report provides a very good compendium of the issues that condition such decisions. There is a sense in which the strategy absolutely depends on the programmes to work on. We have a very clear one on the Type 45 which I feel very comfortable with and the CVF strategy reinforces what we are saying about the Type 45. We know we cannot build the whole of the CVF at one location. We know that shipyards have to cooperate therefore to build modules in different locations and assemble them together into a single ship at some location. All of that groundwork is underpinned by what we are doing with the simpler ship such as the ALSL where Swan Hunter are the lead. Ships are being constructed on the Clyde now to a Swan Hunter design. That requires cooperation between two yards who do not instinctively cooperate. This is practising at it. We also have Vospers and BAE SYSTEMS practising so we are now beginning to see a network of shipyards who can cooperate to build a ship. I think that is a strategy. If you were to say, "Are you ruling out competition for ever?" I think that is the road to ruin. You have to keep that in reserve because if this is not working we will go head to head.

  29. If you are getting them to work together, maybe in your retirement you might be invited to go to Afghanistan and move all the elements together.
  (Sir Robert Walmsley) I am getting uncomfortable about how often you mention my retirement.

  Chairman: You have survived and had so many comebacks. I am delighted that you are here; otherwise, we would be deprived of our bout once a year.

Mr Jones

  30. Can I ask about the future carrier orders? What does the study say about the future carrier orders in terms of their procurement?
  (Sir Robert Walmsley) You mean the connection with the Type 45?

  31. Yes.
  (Sir Robert Walmsley) It warned us about modules. I am making it all sound too easy and I apologise for those who know more about shipbuilding than I do but building modules in two different places and joining them together—hook-up is a good word because hook-up reminds us it is not just welding round the edge; it is all the pipes, electrical systems and weapons systems that have to be hooked up between the two modules. The beam of the Type 45 is about 20 metres. The flight deck beam of a carrier is probably nearer 80 metres so it is a much more complex set of things that have to be spatially in the right places. The first thing RAND pointed out is do not assume that modules can be hooked up without any problem whatsoever. It has to be thought about. These are practical people. They said, "When you transport these modules, you have to make sure they are rigid enough to withstand transport on a barge and they have to be weather proof. You have to close the ends to make sure they do not get sea spray."

  32. It is quite common in the south east Asian shipbuilding industry.
  (Sir Robert Walmsley) All well established procedures. It just is extra work compared with doing it in one shipyard. They said, "Just think about the carrier. You are practising on the Type 45. On the carrier, it is going to be more difficult. Do not assume that it is not an issue that has to be managed." It is.

  33. If you say module design for carriers is not an option, can you tell me which shipyard is big enough to—?
  (Sir Robert Walmsley) I made a mistake if I said that. I tried to say that the carriers will have to be constructed by distributing the modules around the country. What RAND are pointing out is that, because the modules are bigger, the issue of hooking them up takes a lot more management in the design process and control of the construction process, just because it is a bigger piece of material. It is a much more complex task. It is not just twice as difficult; it is probably ten times as difficult.

  34. It is going to be modular build and hook-up?
  (Sir Robert Walmsley) Yes, and a big hole in the ground. Lots of people are saying, "Let me dig the hole and you give me all the ship." We are not going to do that.

  35. Can I go on to the joint strike fighter? What are likely to be the relative costs of a STOVL and a Carrier Variant JSF? What is the current leaning? Is it September?
  (Sir Robert Walmsley) Yes.

  36. Can you tell us what the current thinking is?
  (Sir Robert Walmsley) I have to be a bit careful. We have a competition going on between two consortia, each of whom will have their own view of the relative costs of the CV and the STOVL version but you can see straight away that there will be a capital issue of providing catapults and arresting gear. Probably with a couple of ships that might be 100 million. I quote numbers far too readily in these committees and then people say, "That is not right." It might be 75 and it might be 150. That is dwarfed by the through life costs of the people who have to be trained and who have to man those systems. It is not really the issue of the cost of the ships that will dominate that part of the decision. It will be the through life cost which is how we are trying to do everything nowadays.

  37. It does have an impact on the size and shape of the design.
  (Sir Robert Walmsley) Not much. Surprisingly little, in fact.

  38. That is very strange because that is not what the two bidders are saying. They emphasise that this is crucial.
  (Sir Robert Walmsley) I wonder why they do that. I can only guess. There is not much difference between the overall dimensions of a ship for STOVL and CV. I absolutely agree that if I was a ship builder or a consortium I would want to know whether it was to be a CV or a STOVL aircraft because I have to put in arresting gear. I have to purchase the arresting gear; I have to fit it in the ship; I have to find somewhere to generate the water to make the steam and launch the catapults. They are all irritating problems. Everybody who is designing anything wants everybody else to settle all the details. The overall dimensions will be remarkably similar because it is conditioned by the fact that we have a sortie generation rate which generates the number of aircraft. The aircraft have to go in a hangar. When the aircraft are all in the hangar, they have to be sufficiently still far apart for fire crews to walk between them without getting tangled up in the wings.

  39. I thought that was a crucial point.
  (Sir Robert Walmsley) I do not want to sound too dismissive, but I do steamroller a consortium when they start saying, "Our lives are impossible because you have not made this decision." I say, "Rubbish."


 
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