PARLIAMENTARY DEBATE
Defence Spending: Small Firms - 12 September 2016 (Commons/Commons Chamber)

Small businesses are crucial for growth and innovation in this country, and we want them to take an increasing share of our growing defence budget. We are committed to achieving 25% of our procurement spend being with small and medium-sized enterprises by 2020. That target is 10% higher than the one set during the last Parliament.

May I say how nice it is to see my hon. Friend in her place? May I drill down a little and ask her what steps she can take to ensure that the Ministry of Defence’s largest customers use small firms to deliver their contracts?

My hon. Friend is absolutely right that it is essential that we work on that not only in our direct defence procurement process but with our supply chains. I am delighted to be able to let the House know that the supply chain advocate network and the supply chain champions, which my predecessor announced, are well under way, and that last year the Ministry of Defence was able to have direct spend with almost 5,000 different companies.

What measures can the MOD take to reduce the regulatory burden on small firms such as those in my constituency when they make applications for defence equipment procurement?

My hon. Friend is right to highlight ways in which we can make the process easier for small and medium-sized businesses. For example, this year we removed the turnover requirement in the pre-qualification process, and we are working towards simplifying the contract terms and reducing them to just three pages.

I welcome the Minister to her new position. Will she take notice of what happens in Huddersfield, where we have David Brown Gear Systems and many other fine companies making things that our defence forces want? Will she dissociate herself from the term “fat and lazy”, which was used about British businessmen? We have no fat and lazy businessmen in Huddersfield.

Those were certainly not my words, and I pay tribute to the many businesses in Huddersfield and South Yorkshire that do such wonderful work in supplying the Ministry of Defence.

On Wednesday I raised the issue of an engineering company in my constituency that had gone into administration. I place on record my appreciation of the Minister, who, at very short notice, scrambled around and rearranged her diary to meet the administrators, who are in the Gallery today. We thank her very much. In advance of that meeting, will she agree to work with me and the administrators to leave no stone unturned, so that we can do our best to save valuable jobs and engineering experience at Penman?

The hon. Gentleman is working hard to represent the interests of his constituents; not only did he raise this case last week at Prime Minister’s questions but I am pleased to say that we will be able to meet him and the administrators later today.

In Rugby we are very proud of the contribution that GE Power Conversion is making to the Type 26 global combat ship programme; it is also important to recognise its contribution to the local economy through the orders it places with subcontractors and through local small businesses.

My hon. Friend is absolutely right to highlight that earlier this year we were able to announce contracts for some of the long lead-time items as part of that programme, and also to highlight the way in which small and medium-sized businesses play such an important role in that supply chain.

It is interesting to listen to the Minister. I greatly support the aim of 25% of defence expenditure being with small and medium-sized enterprises by 2020. However, figures published last month showed clearly that only 2% of spending went to companies assessed as SMEs. The SME status of suppliers is determined by independent verifiers. Why has there been no assessment of new MOD suppliers since 2014? Is the Department resorting to creative accountancy?

I do not recognise the figures that the hon. Lady cited. I can confirm that in 2014-15 we spent 19% with small and medium-sized businesses. She will be aware that, as she highlighted, the contract with Dun and Bradstreet for evaluating the characteristics of different firms, which is a Cabinet Office contract, ended in 2014. We are in the process of discussing with Cabinet Office colleagues what the successor framework will be like.