Another former Armed Forces Minister is right, and he will know that the effect of the dollar exchange rate on buying so many big off-the-shelf items from the US has cropped up time and again at both the Defence Committee and the Public Accounts Committee.
The problem does not apply just to air platforms. Boeing had a major logistics contract with the MOD called the future logistics information system, or FLIS, which was due to run until late 2020. However, as was evidenced by the Public Accounts Committee, in late 2020 the MOD signed a five-year contract extension called “Bridging the gap”, worth £515 million to Boeing, which was not even competed. That raises questions about the degree to which the MOD seems to be mesmerised by Boeing as a company, to the detriment of value for money for the UK and for our industrial workshare. Indeed, the PAC subsequently reported:
“We are…concerned to hear that the MoD awarded the contract for this £515 million programme to a large defence prime contractor without a competitive tendering process.”
That is all the more surprising given that in the 1990s, the standard policy of the MOD was to ask for a 100% offset in major off-the-shelf procurements of military equipment from abroad, especially from the US. For instance, in the late 1990s, for the purchase of the C-130J Super Hercules, Lockheed Martin was required to place work to the equivalent of 100% of the multibillion-dollar contract value with UK industry. The work could take one of two forms: direct offset, which is work on the aircraft platform itself, such as propellers or undercarriages or logistics support, or indirect offset,
which is other high-quality work to be placed with the UK defence industry over the life of the programme, but not necessarily directly related to the platform itself.
Under the Blair Government, for whatever reason, the policy was quietly dropped. That has allowed a situation to develop whereby the MOD has bought a number of big-ticket items from the US without receiving any legally binding guarantees of compensating workshare for the UK industry. I therefore suggest to the next Government, of whatever political colour, that if they are reviewing defence, they might want to look at reintroducing the concept of 100% offset for any further major offshore procurements.
In some cases, it is operationally the right thing to buy something off the shelf from the US. I would argue that Wedgetail—at least when it was five aircraft, anyway—was the right decision, but I do not think it acceptable that we hand out such handsome contracts to foreign suppliers without UK industry being given its fair share.
In conclusion, a cynic might say that Boeing is a company increasingly in crisis, which is falling apart even more rapidly than the aircraft it purports to build. That is serious for us in the UK, as like it or not, Boeing is one of our major defence suppliers and is responsible for supporting key equipment in service. We do not want that company to fail. Therefore, we can only hope that the incoming management will take a firm grip of the situation and turn it around—the sooner, the better.
Lastly, it is very good news that we are reversing the downward trend in defence spending and are now investing more, rather than less, in the defence of the realm. That is very much to be welcomed, but it is a question not just of how much we spend, but of how well it is spent. I very much hope that with the new integrated procurement model and perhaps a couple of humble suggestions that I have been able to offer this evening, we can put more of that money to good use to ensure that we, our people and our allies remain safe in an increasingly dangerous world. Si vis pacem, para bellum.