HC Deb 23 July 1973 vol 860 cc1336-44
Mr. Sheldon

I beg to move Amendment No. 4, in page 3, line 10, leave out '£250 million' and insert '£240 million'.

This amendment arises from the Standing Committee not having examined this point in quite the detail which perhaps a number of people would have wished. This is not to cast any doubt upon the abilities and work of the Standing Committee, but the House will recall that we were in the middle of a printing dispute and, as a result of this, Order Papers and other documents were not made available as they should have been. In fact, even at this moment we are still under some difficulty because we have only the typescript, that hefty document which I do not think many hon. Members would care to bring into this Chamber.

The purpose of this amendment is to ask the Government to justify the figure of £250 million. In seeking to justify this, I thought they would have some idea of the net assets involved and some knowledge of the public dividend capital that they will be adding. I hope that the Minister of State will be able to say something about this, too. When he comes to fixing the various funds in excess of the net assets—because they will include the public dividend capital —I should be pleased if he could tell us something about the principles that he now expects to adopt.

Although these matters were not explored sufficiently in Committee, it would not be unreasonable at this late stage to expect them to be explored now, because of the difficulties that we have been under during the past few weeks.

12.30 a.m.

Mr. Judd

I hope it is in order to raise, under this amendment, the question of the situation as it affects the Royal naval dockyards. Some of those hon. Members who have the privilege of representing dockyard constituencies are concerned about the lack of detailed application to the problems of the dockyards and their administration that is evident from the general drafting of the Bill.

It seems to me, as I consider the general philosophy behind the Bill, that Ministers have formed the impression that all they have to do is to introduce the principles of the new approach to book-keeping for this important service provided to the Royal Navy and things will be well. I believe that the danger of this approach is that it tends to distract attention from the basic restructuring that is necessary.

I hope that, in answering the points made by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the Government have taken into account the serious situation with which the yards are confronted because of the imprecise and complex nature of management as it is now. One of the difficulties of every dockyard is that those with immediate responsibility in the front line are aware, when they are trying to grapple with management problems which are their immediate sphere of responsibility, that they are not their own masters. Behind them, stretching back eventually to No. 10 Downing Street, lie Bath, the Ministry of Defence, the Civil Service Department, the Treasury and, indeed, the Prime Minister at No. 10 Downing Street and his general strategy for the economy.

If the Government are really serious about improving the environmental working conditions for those in the yards—a question that the Minister referred to when I intervened on the last amendment —and if their concern is to increase efficiency in the yards, they must be thinking a good deal more about how to sort out the jungle of management relationships which make life for those on the job very difficult. Not only the management of individual yards finds itself in difficulties; one of the other problems that arise is that workers in the yards are aware that when they have problems they cannot sort them out immediately with the management on the spot.

The other point to be made in this context concerns the duplication and complication introduced into this situation because of the confusion that exists in the naval dockyards between naval control and civilian control. From time to time we hear that those with responsibility in the yards have been given new jobs. Their responsibilities are theoretically redefined, but when we consider the situation it is always the same—there is a good deal of duplication and confusion arising from this dual management responsibility in the front line.

If the Government are serious about trying to improve the situation they must give a good deal more evidence than is yet available that they have looked at the practical problems with which the dockyards are confronted and not simply at the theoretical problems, as seen from the high standpoint of the Treasury.

Dr. David Owen (Plymouth, Sutton)

I rise to speak as a general supporter of the Bill as it affects the Royal dockyards. I know nothing of its impact on the Ordnance Survey. I have considerable reservations, however, and I think that the Minister should explain some of the details of the admittedly enabling legislation as it affects the Government's prime industry, which is the Royal dockyards. It is easily forgotten that the Royal dockyards represent one of the largest single industries in the country. It is the largest industry which comes under the direct responsibility of Ministers. It employs a very large industrial work force and it involves heavy expenditures of public money.

The first issue I should like to raise under the question of the financial ceiling under which these various entities might be incorporated under a trading fund relates to the target that is likely to be given for the Royal dockyards. I wonder whether the total cost of trading funding for the Royal dockyards could be given by the Minister and whether he could also reveal the date on which he hopes to bring forward the legislation as it affects the Royal dockyards.

The Minister will be aware that the Defence and External Affairs Sub-Committee of the Expenditure Committee, of which I am a member, took evidence from Sir John Mallabar on the Mallabar Report. At that time the Mallabar Committee recommended April 1974 as the date when the trading fund should come into operation. That recommendation appeared to have been accepted, but it now appears that the fund will not be fully operational until the financial year 1976–77. I should like to have an explanation of this delay. Certainly, the Expenditure Committees view was very similar to that of Sir John Mallabar, that the quicker the fund was introduced the better.

Having said that, I come to the question of what degree of managerial freedom will be given to the management of the dockyards. We have heard a good deal about managerial accountability, and that was the basis of some of the Fulton recommendations on which the trading fund was established.

When I was at the Ministry of Defence, where I was a strong proponent of the trading fund as a way of trying to introduce a form of financial discipline into this very large industry, it seemed to me imperative that, if we were to give managerial accountability, hand in hand with that we had to give managerial freedom. It is not satisfactory to put legislation before the House unless we are to be given an indication of the managerial freedom that goes with it.

First, we need an assurance from the Minister that the dockyards will henceforth be firmly and clearly under civilian management. The decision made by Ministers in 1969 that the chief executive of the dockyards would be a civilian and that the dockyard management would henceforth be a civilian industrial managerial staffing job should now be the policy of the Government and we should see an end to the recent appointment of an ex-naval officer as the chief executive of the dockyards and, more recently, of ex-naval officers as general managers of the dockyards. Cannot we stress tonight that this industry involves £100 million a year and a very large industrial work force and needs to be put firmly under civilian management?

My next question to the Minister under the financial heading is to ask what degree of financial freedom will be given to the managers of the dockyards. What is their investment policy? Who will decide it? Within the overall ceiling, will the allocation of expenditure be a decision made by the chief executive of the dockyards? I speak with feeling about this, having had considerable difficulty in persuading the then Civil Service Department to pay an adequate wage for the chief executive of the dockyards. As a result, we lost an industrialist of considerable note and ability.

Will any Minister—the Minister for the Navy or whoever is responsible for the dockyards—be able to appoint as chief executive for the dockyards a man of proved managerial responsibility? Will that decision be made by him or will he be answerable to the Civil Service Department? Under the new trading fund, what will be the responsibility of the Civil Service Department? Will it continue, as at present, to involve itself in minute managerial details such as the fixing of a productivity deal?

The Royal dockyards started on a difficult and painful course towards productivity bargaining in 1969. It has run into the sand because of the Treasury's interference with the managerial freedom of the general managers of the dockyards to fix productivity bonuses on the basis of productivity in an individual dockyard. Because of Treasury interference, productivity bargaining inside the Royal dockyards has been gravely imperilled and the whole effort aimed at improving productivity has been impaired.

The next question relates to construction in the Royal dockyards.

Mr. George Lawson (Motherwell)

Why did my hon. Friend not raise these matters in Committee?

Dr. Owen

Committee membership is a decision for somebody else. It is late at night, but I assure my hon. Friend the Member for Motherwell (Mr. Lawson) that this affects a considerable number of my constituents.

Mr. Lawson

On a point of order, Mr. Deputy Speaker. My understanding of a Report stage is that matters are tightly drawn. Is it in order on this amendment to go over the whole issue of dockyard management?

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

There has been nothing out of order so far.

Dr. Owen

If my hon. Friend will allow me to continue, I would remind the House that this Bill affects 24,000 of my constituents. It is a matter of considerable importance to them that the method of financing and control of the dockyards is changing. They have some right to be heard in this House where they have traditionally had their rights represented.

Mr. Lawson

But these matters should have been raised in Committee.

Dr. Owen

Membership of Committees is not decided by me. I would gladly have served on the Committee.

The question I should like to pose to the Minister relates to new construction in the dockyard. Whose decision is that to be? Is this to be a decision by Miniters, or is it to be delegated to the chief executive in the dockyards? This matter is particularly relevant in view of the Booz-Allen report and the Government's acceptance of it. If the House is to pass legislation to give dockyards a considerable amount of financial freedom, I hope it will give them better managerial accountability and managerial freedom. We should be able to manage the dockyards' resources and expenditures on the basis of decisions between individual dockyards so that they will be able to use their resources with a great deal more freedom than they have been given hitherto. They will be given a financial budget on which they can rely for at least four years ahead and will not be susceptible to a simple year's accounting principle.

May we be given some idea of the time scale in which enabling legislation will be brought before the House and some assurance as to how the Minister sees the role of the managers in the dockyards? There is a great anxiety among the different levels of management and anxieties have multiplied ceaselessly. The level of the number of industrial staff. the people on the shop floor, has not kept pace with other aspects of the situation. There is an anxiety that they will be over-managed; yet the managers are not given sufficient freedom to make their decisions. I feel sure that if the Minister can give these assurances the Bill will be given more full-hearted acceptance than it has been given hitherto.

Mr. Nott

I shall deal first with the amendment and then try to answer some of the questions asked by the hon. Member for Plymouth, Sutton (Dr. David Owen).

The provision of £250 million has been drawn up taking into account the known investment plans of the organisations named in the Bill, and after making some asumptions of the extent to which it would be possible to finance those investment plans from the receipts of the trading fund organisation. The £250 million does not include the originating debt of the trading funds. It does not include the net asset value of the six organisations set out in the Bill. The £250 million is the best estimate we can make—there must be room for considerable error looking ahead this far, but as this is an enabling Bill we thought that we should do our best of the further requirements of these organisations for capital expenditure in future years.

12.45 a.m.

Each organisation will require an affirmative resolution, and for each organisation there will be a borrowing power included. There will be within any affirmative resolution we bring forward in respect of the Royal Mint a figure for the borrowing powers of the Royal Mint.

This is an aggregate power over and above the originating debt of the organisations. In deciding on the limit of £250 million we had in mind that it would be wrong, on the one hand, to have to come to Parliament to raise the limit more than once in the lifetime of any Parliament; yet on the other hand it would be wrong to include such a high limit that Parliament did not have an opportunity, after a reasonable period, to consider the operation of the trading funds as a whole.

I repeat that this is an enabling Bill. The £250 million is a global, aggregate figure covering all the organisations mentioned.

Public dividend capital would be part of the originating debt. I do not know that I would describe public dividend capital as a debt as such, but it would be on the other side of the balance sheet to the assets of the trading fund organisation. On Second Reading I set out the criteria to which we would look before deciding that it would be appropriate that a particular trading fund should have any public dividend capital. This is again a matter we can debate when each of the trading funds is considered. I draw the attention of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) to what I said on Second Reading. repeating the point made by my right hon. Friend the Chief Secretary in a debate on public dividend capital on 9th August 1972, that we believe that a particular public enterprise must be viable and must be required to meet specified targets. These are the main criteria we are thinking about before deciding that public dividend capital is suitable.

I set out two or three other criteria as being desirable in my speech on Second Reading. If hon. Members wish it, I should be happy to go further into the question of public dividend capital.

The Mallabar Committee recommended a trading fund for the Royal dockyards. This recommendation has been accepted by the Government in principle as an objective for the financing and management of the Royal dockyards. Much remains to be done. We are still considering a great number of the recommendations in the Mallabar Report.

It would be premature for me to seek to answer in detail some of the questions raised by the hon. Member for Sutton about construction in the dockyards. That falls within the responsibility of the Ministry of Defence. The hon. Gentleman would probably get a much fuller answer from that Department. In many respects he knows this subject much better than any Treasury Minister, in view of his previous experience in the Ministry of Defence. The recommendations of the Mallabar Committee are being considered in depth, and I could not at this time answer all the hon. Gentleman's questions.

We are considering some of the financial problems which arise in the setting up of a trading fund for the Royal dockyards. There is at present no clear customer-supplier relationship between the fleet and the dockyards. This is one of the things that needs to be established. The dockyards are not separately financed as such but draw their funds from a variety of Votes and sub-heads. It will therefore be necessary to establish how far it is possible and desirable to clarify the customer-supplier relationship and separate the finance and control systems for the dockyards from those for fleet support generally.

final decision can be taken on the introduction of a trading fund. A trading fund for the Royal dockyards could not, in our opinion, be introduced before 1976. There is a target to do so but no firm decision has yet been taken.

On managerial freedom and the other matters that were raised, I agree with a great deal of what the hon. Member said. Management accountability as we see it will go hand in hand with a considerable degree of management freedom. Management will be given a financial target, and it will be its function to meet that target, working one year with another. It is my hope and that of the Government that the establishment of a trading fund will help to achieve many of the objectives that the hon. Member outlined. On, for instance, the Royal Mint, which it has already been decided should go into a trading fund, the principle that the hon. Member enunciated, of greater management accountability and freedom within the financial targets that are laid down, is a prime objective that we should pursue. So there is little between the Government and the principles that the hon. Member enunciated.

Mr. Judd

The Minister speaks of management accountability and freedom. At what level do the Government feel this to be important—all over the dockyard management, from, say, Bath to Whitehall. or at individual dockyard level?

Mr. Nott

It is far too soon for me to answer a specific question of that sort. It is one which is much more appropriately put to a Minister in the Ministry of Defence. It is not possible at this stage, when we are considering the question of a trading fund in 1976, and are still considering many of the recommendations of the Mallabar Committee, to be drawn into answering that type of question.

Mr. Sheldon

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

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