§ 3.0 p.m.
§ Mr. Jim Lester (Beeston)
The subject I wish to raise, unlike that of the previous debate, concerns a decision that is yet to be made. It is one that we are currently arguing about rather than one that has already happened. I hope, as an hon. Member on the Back Benches, that with the support of others I can influence a future decision. I welcome the chance to put this matter before the House.
I have had considerable correspondence with the Minister about the proposal to close the Central Ordnance Depot, Chilwell, which is in my constituency. I see this not as a narrow constituency argument but in a much broader context, that of trying to maintain military efficiency. I shall argue only on the basis that there is a danger that the Government may not achieve the desired savings.
979 I speak with the support of the trade unions on the site, which have maintained a vigorous and reasoned opposition to the closure through the established Whitley channels. I also have the support of six local hon. Members, three from each party. One cannot be fairer than that. I speak with the support of Broxtowe District Council, which has made considerable surveys of the effect that the closure will have on the area. The council may seek to speak to the Minister about this at some time in the new year. I am also talking with the support of the Opposition Front Bench defence team, which has raised this matter in previous debates.
I do not challenge the defence cuts that are the declared policy of the Government. Whatever my opinion on that may be, that subject is not the purpose of today's debate. The need to streamline support services in line with reduced military commitments is accepted. My argument is about whether this proposal is the best way in which to achieve streamlining in terms of people, jobs and cost and, in the final analysis, in terms of military efficiency.
The fair value proposals, which have now been refined in more detail, made two initial assumptions that I challenge. It is assumed that COD concerns of every type and speciality can be as efficiently processed on two locations as on three. This assumption ignores the manpower recruiting problems at Bicester, the historical cost and types of issue and, more fundamentally, the use to be made of the space created at Chilwell.
The second assumption is that modern, high-density storage techniques have as important a rôle to play in the running and efficiency of military establishments as in civilian ones issuing similar types of stores. This is a false assumption because it makes a wrong comparison between civilian needs for issuing stores to such establishments as motor car factories and the very different basis upon which COD stores are maintained—the basis that, whatever happens, we must have sufficient spares to maintain our fighting forces over a period of time.
Having made those assumptions one then gets into the numbers game—calculating the cubic storage capacity of the 980 three CODs and dividing them one into the other so that only one answer can be produced, and that is the closure of COD Chigwell. The figures fail to sustain a convincing case. They fail to convince me or others that the Army will have an organisation for storeholding and distribution that will be economically, socially and, most important of all, militarily effective.
In order to close the most cost-effective depot of all, COD Chilwell, in order to achieve savings of £2 million a year, the Government will be faced with considerable capital outlay on new equipment and services for the two remaining depots. The Department may have to pay for new buildings. This is at a time when there is increasing pressure on the Ministry of Defence to save money and when a new round of defence cuts has just been announced. This is a time when we should think carefully before embarking on expenditure of £8 million or £9 million in order to achieve paper savings.
The closure will involve an enormous amount of reorganisation, cost and planning for the preparation of the two receiving depots. For the first time, 50,000 to 70,000 tons of stores will be moved. Those figures give an indication of how difficult it is for us to accept the statistics given to us by the Government. The parameters are so wide. Twenty thousand tons is a very large gap. There will be 323,000 separate items to be processed.
At the same time, however, COD Chilwell will be asked to maintain an effective supply organisation for the Army, the Navy, the Air Force and overseas Governments. I want to stress the position of overseas Governments. At a time when the Secretary of State is quite rightly trying to develop our defence industries, and when good will is particularly important, the whole range of supplies for foreign Governments will have to be supplied from COD Chilwell during the reorganisation. The Secretary of State is asking COD Chilwell to carry out the difficult operation of maintaining a service and at the same time moving such an enormous tonnage.
The reorganisation will involve extra jobs at Chilwell because the depot will be carrying out two separate functions. The depot is now recruiting staff, and recruiting will continue up to the moment 981 of closure. One wonders to what extent redundancy costs have been included in the estimated cost of the proposals.
After the move, an excellently designed and purpose-built building will be left behind for an undisclosed use. It has been maintained at high cost and is in perfect working order. Yet there will be no particular use for it. It may be that there will be an alternative use, but in any case the building will require maintenance and rates will be charged on it. A military installation, requiring servicing, and a garrison will also be left at Chilwell. Unless there are plans for total closure and clearance of the site—and that brings in the whole question of misuse of resources—this is an important factor that should be considered.
There will also be a social problem. My constituency will lose between 14,000 and 15,000 jobs which will be difficult to replace. I do not want to be party political and contentious, but Government action on VAT, the closure of the Vic Hallan factory, the closure of a post office, the problems of Plessey Telecommunications and many local bankruptcies and receiverships will all lead to unemployment in one tiny constituency.
Many employees have had the prospect of closure of COD Chilwell hanging over their heads for some time. They know that the chances of other employment are remote. Yet these people are being asked to co-operate and to take on additional responsibilities in the running of the service during the transfer of the enormous tonnage of stores. The case is not convincing, and we are not convinced.
Another reason of which the Minister is aware is doubt over the validity of the figures. It is strange that, when we questioned the figures and produced a different number of jobs in Chilwell, the revised view of the number of jobs required at Donnington and Bicester went down by a similar number, thereby leaving the savings the same. When more stores were found at Chilwell than anyone imagined existed, a new review took place and 323 cubic feet of storage space was found to accept those stores at the other two receiving depots. When we checked on this, we were told that they were using the Old Dalby sub-depot of Donnington, which is actually nearer 982 Chilwell than Shropshire. This is the sort of thing that makes everyone worry and increases our suspicions.
The present position is untenable. Hon. Members and the work force have not been convinced, and we have suggested that there is a reasonably credible alternative. Unless it is costed and presented, the chances of the Minister achieving the results he expects are remote.
There is a good case for three slimmed-down depots. This solution would require no additional capital expenditure on a large scale and would mean that new handling equipment could be deployed on a cost-effective basis. I do not accept the argument about tall buildings, because there are such buildings at Chilwell which could be redeployed and the more modern methods of handling could be brought in stage by stage.
The alternative solution would also retain the existing skills and high efficiency of the current employees, and no one who knows Chilwell would wish to penalise the people who have worked there, many for their whole lives. The same is probably true of Donnington, although less true of Bicester, which I know because I was once stationed there. Even more important is the good will of the employees at Chilwell. This is a key factor. British Leyland is making a great effort to get participation and good will among its employees. At Chilwell we are doing the opposite.
The alternative solution would produce, through negotiations with the trade unions, immediate and greater manpower savings than the whole fair value exercise is designed to achieve. On a properly agreed basis, spread over the three depots, there could be a greater reduction of manpower through retirements, without any redundancies, with a much wider social spread and far less damage and personal hardship to any particular locality.
It would also produce space alternatives on a more sensible basis. We should be producing space in three locations instead of one. It would be chosen on criteria of suitability, and if, for example, perimeters of Donnington, Bicester or even Chilwell were suitable for disposal they could be released, and this would be a permanent release because one could say that the Army did not require them.
983 This would bring much greater savings than a series of empty sheds in the middle of the Chilwell establishment.
The solution would also avoid one thing which the Minister must have had in mind and which has never been done before—that is, the trauma of trying to retain military efficiency and to spend three or four years running an impossible combination of recruitment, retirement and redundancies, with key staff leaving whenever they get the opportunity and the industrial resentment which is inevitably caused by an additional work load. The effect on a worker of having to work himself out of a job should not be underestimated.
Another reason for the alternative solution is that it would lower the cost to the national Exchequer. We should remember the cost of high unemployment and bear in mind that we are talking about 1,400 jobs in one locality. When firms approach the Government and ask for help to keep a factory open, they often calculate the cost of unemployment pay if the factory had to close.
In the end, this is a matter of judgment. The Minister has been most helpful in keeping me informed, and I understand that the decision has not yet been made. I can inform the hon. Gentleman that the fight has only just begun.
Reasonable doubt exists about the motives of the fair value proposals, their cost-effectiveness and their timing. We shall be watching in the coming months to see how this develops. There is a reasonable alternative which has not been costed or presented. The present plan will be difficult to implement and is not convincing.
We think at this time of year of Charles Dickens and Christmases past, present and to come. The best Christmas present that the Minister could give to my constituents would be to tell them that he is not going to close the Chilwell depot, but perhaps that is asking a little too much.
I hope that, having heard what I have said, the Minister will recognise that the case which I have presented is reasonably logical and that he will offer an independent assessment of the proposal for the three slimmed-down depots. I wish to see a happy work force at 984 Chilwell and a properly-run military establishment so that our Services and overseas Governments can look with pride at the job done by central ordnance depots in this country.
§ 3.17 p.m.
§ Mr. Gerry Fowler (The Wrekin)
I wish to make only one brief point. I have every sympathy with the hon. Member for Beeston (Mr. Lester), but my constituency includes Donnington, which is situated in Telford New Town, where the Government have spent, are spending and will spend millions of pounds a year to generate employment.
It is an area of historically high unemployment, especially female unemployment, by the standards of the West Midlands and the southern half of the country. The Donnington depot alone helps to relieve this situation, and I should view with great disfavour, if there were any other way of doing it, the rundown of employment at Donnington.
§ 3.18 p.m.
§ The Under-Secretary of State for Defence for the Army (Mr. Robert C. Brown)
I cannot start by saying, as Ministers usually do, that I am grateful to the hon. Member for raising this debate. I should have preferred to be somewhere else today, and it would be hypocritical of me to say otherwise.
The hon. Member for Beeston (Mr. Lester) has made a number of points, to which I must reply at some length if the proposal for the closure of the Central Ordnance Depot at Chilwell is not to be misunderstood. The House will, I am sure, agree that the closure of a large, central installation ought not to be contemplated unless there are overriding reasons for it, especially when there is a possibility of redundancies amongst the civilian employees there. Before giving those reasons, I believe it will help if I briefly outline the background to this proposal.
It will be recalled that the Statement on the Defence Estimates 1975 indicated that one of the consequences of the defence review would be a large reduction in the number of civilian staffs directly employed in the support of the three Services at home and abroad, as well as those engaged in defence work in industry. The statement also explained that the primary aim of the defence 985 review was to maintain unimpaired, to the maximum extent compatible with the new levels of available resources, both the quality and quantity of the United Kingdom's operational contribution to NATO. Consequently, support activities would be required to bear a proportionately larger share of the total reductions than "teeth arm" units.
During 1975 and 1976 the Army Department conducted a wide-ranging series of studies to identify the measures needed to achieve economies in its support functions and infrastructure. In these studies the logistic services were reviewed against an underlying assumption that, because there would be no significant reduction in the number of Army teeth units or major equipments requiring logistic support, there would be no significant decrease in the size of the Army's stores inventory, the volume of storage required or the level of ordnance supply activity. In short, although we could expect some reductions reflecting the 8 per cent. reduction in the Army's military manpower over the next few years, the size of the support task would remain substantially the same.
It quickly became evident that the economies in both operations and staffing in the logistic area could not be obtained by an across-the-board reduction, and the studies confirmed that more radical measures were likely to be necessary. These would have to be based on a restructuring as the main source of defence review savings, and restructuring could yield the required savings only through the closure, where this was possible, of whole establishments to provide not just the necessary reductions in both military and civilian staffs but also reductions in administrative and other overhead costs. It is against this background that the proposal to close the Central Ordnance Depot at Chilwell must be considered.
In February 1976 the results of the Army's first studies of logistic restructuring, an exercise called "Fair Value", were published in a consultative memorandum to which I drew the attention of the House in reply to a Question from my hon. Friend the Member for Hornchurch (Mr. Williams) on 10th February. These proposals included a rationalisation of the existing three central ordnance depots by closing the depot at Chilwell and transferring its stores to the two central 986 ordnance depots at Bicester and Donning-ton.
Following publication of these proposals, consultations with staff and trade union representatives led to an agreement to make the proposed closure of Chilwell the subject of a special review, and a further consultative memorandum validating and amplifying the details of the proposal was published. More detailed studies during 1976 confirmed that considerable annual savings could be achieved by the early 1980s by the closure of Chilwell and at the same time the modernising of the Bicester and Donnington depots.
I believe that this proposal should be viewed as a stage in an evolutionary process aimed at a continuing improvement in the Army's levels of efficiency and economy of operation. Since 1964, cuts in defence expenditure and successive reductions in the size of the Army and of the stocks required for its support have resulted in the progressive closure of two central ordnance depots and a number of sub-depots in the United Kingdom.
As part of management's continuous search for economies, the RAOC carried out in 1973 an examination of its longterm storage assets and requirements. A feasibility study indicated that the use of modern storage equipment could result in the number of CODs being reduced from three to two with substantial savings in administrative overheads. The closure of a COD during the 1980s was therefore inevitable, and the defence review merely advanced the date by half a decade.
The hon. Member for Beeston suggested alternative ways of obtaining the savings we need, and I will comment on his suggestions. First, we have studied the possibility of operating all three CODs on a reduced scale. However, the efficiency of any storeholding organisation is increased by a concentration of its stocks in as few locations as possible, and its cost-effectiveness is improved by the reduction of managerial and administrative overheads which would flow from such a concentration. By operating the three CODs even on a reduced scale, we would lose the overhead savings to be gained from closing Chilwell and, because we would still have to find the financial savings required by the defence review, equivalent savings elsewhere could mean the loss of an additional 450 jobs in the Army's logistic services.
987 Secondly, we have considered whether it would be more rational to close either Bicester or Donnington instead of Chilwell, where alternative employment is hard to to find, but, as I shall explain more fully in a few moments in stating the case for closing Chilwell, we can accommodate the future storage requirements of the Army, without a new building programme, only by a combination of the Donnington and Bicester depots.
Thirdly, we have considered closing installations on the Continent instead of Chilwell, and we are already making proportionately larger reductions in our civilian work force overseas than in the United Kingdom. As far as is practicable and within the limits of operational requirements, we are making savings on the Continent and will continue to seek more.
I turn now to the case for closing COD Chilwell. The three existing depots taken together have more capacity than is needed by the Army, and in these times of financial stringency it would be indefensible to hold unnecessary reserves of resources. On the best estimates that can be arrived at by the Army's professional experts, it is only the combination of the Bicester and Donnington depots which would provide sufficient storage depot space now with a margin for expansion to meet future requirements. Any alternative configuration would result in unacceptable penalties in terms of extra costs for new buildings and a delay in meeting the defence review deadline of 1st April 1980. Furthermore, if the need should arise in the very long term for an expansion of the central installations, the Chilwell depot would offer relatively little room for this whereas COD Bicester in particular already has ample room for expansion.
The cost savings would be substantial. There would be an annual saving of £2 million, which is a conservative estimate. The new consultative memorandum published in early September gave a figure of nearly £8 million as the cost of the reorganisation. This figure was cautiously pitched on the high side, and already detailed contingency planning is producing evidence that the capital cost is likely to be lower. In short, the initial 988 capital costs of reorganisation are likely to be recovered within four years or sooner, and thereafter there will be a welcome annual saving of a minimum of £2 million to the defence budget. These are savings which it would be extremely difficult to forgo.
I have said that these cost estimates are of a conservative nature. There are other potential savings, difficult to quantify, which have not been claimed as part of the basis for a decision to close the COD but which nevertheless are likely to accrue. For example, there is a sum of £1.3 million which is currently spent on rates, heating and maintenance, some part of which will undoubtedly be saved. In addition, the COD site at Chilwell occupies valuable urban land which could be disposed of if other Government use cannot be found, and it is estimated, again cautiously, that the benefit to the defence budget might be as high as £2 million for the land, or round about £10 million if the existing sheds are taken over for commercial use.
The reductions in staffs which this reorganisation will produce are estimated to be as follows. Military personnel will be reduced by 18 officers and 94 soldiers of the RAOC. The number of civilian posts to be saved will be at least 375, and continuing studies suggest that the number of posts to be saved could well be higher.
I am very conscious of the redundancy problem which is inseparable from this kind of proposal. However, a critical look at the possible size of the redundancy problem, within the figures I have just quoted, makes it clear that, at its maximum, the number of civilian employees which could become redundant would be 1,240 and that this number will probably be substantially smaller for a number of reasons: the rundown of Chilwell taking place over at least four years, during which time some 175 civilians will have reached the retirement age of 65; the relatively high natural wastage within the COD and other units in the Chilwell garrison—for example, the depot employs large numbers of married women and has more than a 10 per cent. annual turnover of staff; and efforts which will be made to find alternative work by the Ministry 989 of Defence, the Department of Employment and other Government Departments. These will all play a part.
I should like to assure the House that I am very mindful of the adverse effects not only of the closure of COD Chilwell but of the reductions and closures of other Army establishments which are planned to take place during the next few years. We shall be making every effort, in consultation with local staff interests, to take advantage of natural staff wastage, to transfer staff to suitable alternative Government work and to consult closely with the Department of Employment. In this connection, closures and reductions will be spread over as long a period as is practicable and consistent with the targets we are facing.
I do not in any way underestimate the effect which these economies will have on some of our employees, but it is something we have to face if the Department is to make its contribution to the reductions in public expenditure which are required in the national interest, not only as part of the defence review but as part of the new decisions announced by my right hon. Friend the Chancellor of the Exchequer last week, and if at the same time we are to maintain the Army's operational efficiency and contribution to NATO.
I fully appreciate the concern which the hon. Member for Beeston has expressed over the effect on his constituents of the closure of COD Chilwell. We have always recognised the need for full and frank consultation with the staff interests concerned over the Army logistic restructuring proposals, and since they were announced in February this year there have been no fewer than six consultative meetings at departmental level, as well as numerous local meetings, to discuss these proposals. A meeting at departmental level has been arranged for 7th January, which will be devoted solely to discussing the proposed closure of COD Chilwell, and local staff representatives from Chilwell will be able to make their views known at that meeting. I can assure the hon. Member for Beeston that no final decision on closure will be taken until the views and representations from all sources have been carefully considered.
990 I take on board the point made by my hon. Friend the Member for The Wrekin (Mr. Fowler).