Scots firms squeezed out of defence cash

Published on Friday 24 June 2011 18:30

QUESTIONS have been raised over the level of defence spending in Scotland after new figures revealed that less than 1 per cent of contracts to small and medium sized companies go to firms north of the Border.

According to a written answer from the Ministry of Defence, just 50 contracts out of the 6,000 placed with small and medium sized enterprises (SMEs) are with Scottish companies.

The MoD insisted contracts were awarded according to quality and value for money. But small business leaders rejected any suggestion the quality of Scottish products was to blame for the low level of contracts awarded.

The revelations emerge as military and political leaders meet in Edinburgh today to mark Armed Forces Day.

They also come as wider questions are being asked over whether Scotland is benefiting from UK government investment, with The Scotsman revealing earlier this week that England will receive 24 times more Olympics legacy money than Scotland.

Contracts for SMEs and continuing public sector contracts have been identified both in Holyrood and Westminster as a key part of getting the economy going again.

The written answers to Labour's shadow Scotland Office minister Tom Greatrex also show that other UK departments are either not employing many or any Scottish small businesses or do not keep account of the figures.

The Department for Culture, Media and Sport and the Home Office have two contracts each with Scottish SMEs.

Only 2 per cent of the total in both the Department for Environment, Farming and Rural Affairs and the Department for Energy and Climate Change are with Scottish SMEs, and just 1.1 per cent from the Department for Health.

Meanwhile, neither the Department for Work and Pensions nor the Department for International Development knew whether they had any contracts at all with Scottish SMEs.

Mr Greatrex said that the answers and level of contracts were unacceptable.

"The response from the government on this issue beggars belief," he said. "For so many government departments to have no idea how many of their contracts are awarded to SMEs is astounding.

"Despite making great noise about the importance of small and medium sized enterprises to the economic recovery, these answers make clear that is little more than lip service.

"When government departments are cutting costs the real danger is they award central contracts that cut out small businesses from Scotland and elsewhere. For the MoD, particularly, to make a back-of-a-fag-packet estimate is simply not good enough."

The figures around defence contracts have come to the fore because of question marks over defence spending north of the Border.

During evidence at a recent meeting of the Scottish Affairs Select Committee, Defence Secretary Liam Fox claimed that Scotland received 50 per cent more spending than its population share merited because of contracts with the private sector.

The SNP disputed this and pointed out that Dr Fox had accepted that Scotland got less than its fair share of spending in terms of personnel, with 10,500 personnel lost north of the Border in the last decade.

SNP Westminster leader and defence spokesman Angus Robertson said that the claim on spending was "beginning to unravel".

He said: "The shocking statistic illustrates the unfair treatment Scotland gets from the MoD. It is now patently obvious that we get a really bad deal from defence decision making in Whitehall.

"No Scottish government would ever treat domestic suppliers so badly. It's time to make Scottish defence decisions in Scotland."

A spokeswoman for the MoD said contracts were awarded on the basis of quality and value for money, not geographical location.

She said: "The Armed Forces exist to provide defence and security for the UK as a whole. Military units and resources are stationed, and equipment contracts awarded, where it makes military sense to do so."

Colin Borland, from the Federation of Small Businesses, said it was wrong to blame the quality of Scottish products for a lack of contracts and suggested that there was a problem with the Whitehall procurement process.

He said that he hoped a European Commission inquiry into procurement by EU governments would make the process more transparent and help smaller companies.

He said: "I think there is an issue for smaller companies as a whole, not just the ones in Scotland, that departments like the MoD are looking at the short term bottom line and are moving contracts to bigger suppliers.

"This is undermining smaller businesses in Scotland and in other parts of the UK and needs to be looked at properly."

He added: "It cannot be right that Scotland gets such a small proportion of these contracts, but it is nothing to do with the quality of what Scottish businesses have to offer."

Fair share?

Contracts awarded to small firms in Scotland:

• Ministry of Defence - about 50 out of a total of 6,000

• Dept for Culture, Media and Sport - 2

• Home Office - 2

• Dept for Environment, Farming and Rural Affairs - 2 per cent

• Dept for Energy and Climate Change - 2 per cent

• Dept for Health - 1.1 per cent