§ Mr. A. E. P. Duffy (Sheffield, Attercliffe)I am glad to have the opportunity of opening the debate on the Consolidated Fund Bill and especially of introducing the topic of the Royal ordnance factories. Some of my right hon. and hon. Friends have deep constituency interests in the ROFs and they are concerned that those interests may be prejudiced by a possible change in Government policy.
If, in the light of my acquaintance with the ROFs through my tenure in the Ministry of Defence, I can provide a framework within which my right hon. and hon. Friends can more effectively deploy their constituency anxieties, I shall feel that I have made a worthwhile contribution.
My hon. Friend the Member for Blackburn (Mr. Straw) is especially troubled about the future of the defence establishment in his constituency. He is not the only one. There are 13 factories in Britain that fall within the ROF category and they employ over 20,000 people.
The ROFs, which represent one of the biggest industrial establishments within the Government, manufacture weapons and ammunition for armies both at home and abroad. The organisation has been successful in that.
Over the past three years the organisation's sales have more than doubled to £284 million, and the surplus on operations after interest has risen from £11 million to £36.7 million. Over half its production is exported. In certain products, such as its 105 mm light gun, it is the acknowledged world leader. Over the past six years, it has paid about £40 million in dividends to the Government and reinvested about £100 million in its business.
The organisation suffered a setback in 1979 with the cancellation of an Iranian order for 1,200 tanks. In addition, a long strike at ROF Bishopton, the United Kingdom's largest producer of propellants for ammunition and rockets, has affected the group's performance, which is reflected in the 1979–80 results. Nevertheless, in the year ending 31 March 1979 it earned a surplus of £38,211,000, comprising a surplus in operations of £31,199,000.
I could say more about the financial results of the organisation in the past year on the information available. However, in order to be brief, I merely refer the House to the trading fund accounts. Despite the difficulties in the last full trading year, in which, incidentally, it has been forced to cut its work force by 1,200, the success story continues. It is confident that the downturn in the past year in its business is temporary.
In 1978–79, the group had average funds employed of £150 million. It made a surplus on funds employed of 20.8 per cent. and earned an 11 per cent. return on sales. Even if we take into consideration the downturn of 1979–80, the return is over 10 per cent.
357 We are not talking of an organisation that is experiencing the difficulties of, unhappily, the majority of the British economy, especially the private sector. My hon. Friends will doubtless wish to take up that point. The ROFs are a successful part of the British economy. However, the Government are seriously considering introducing private capital to the organisation. A special study group has been formed under the chairmanship of Lord Strathcona, the Minister of State, Ministry of Defence, which consists of representatives of private enterprise, as well as the Ministry of Defence, the Treasury, the Department of Industry and the ROFs. It is expected to review a number of options. Hon. Gentlemen, and particularly the Under-Secretary of State for Defence for the Army, will understand why the Opposition are profoundly suspicious of the intentions of that study group. It will consider a number of options. It will consider the continued accountability of the organisation on the basis of a trading fund. It is just remotely possible that it will allow the organisation to progress to the status of a fully fledged public corporation.
On the other hand, we fear that the study group will look for grounds on which to sell off parts to private enterprise. Two factories are already managed by private industry. We know that the ROF could be turned into a limited company under the Companies Act, thus enabling the Government to sell shares in the company, as is planned for British Aerospace.
Why, when we are dealing with a success story, are those latter options being considered? After all, there is no embarrassment in relation to the PSBR. There is no wish to distance the ROF from the PSBR, because the ROF makes no claim on that requirement. Is the Minister prepared to say, in all seriousness—this is the only credible alternative aim—that the Government are genuinely concerned to find a more cost-effective way of providing material for the ROFs? Is he prepared to say that that is the Government's intention?
Let us consider the major components of cost effectiveness. First, let us consider security. Will security be enhanced by changes in the ROFs, especially if such changes involved hiving off in the direction of privatisation? Will security be enhanced?
§ Mr. DuffyHardly, as my hon. Friend acknowledges. There appears to be no case for furthering security through privatisation. Privatisation smacks more of ideology.
So are the Government trying to promote private interests? I do not know on what grounds that could be done. That is more likely to promote the cause of private advantage. Indeed, it is difficult to rid oneself of the suspicion that the Government are seeking the reward of private industry. But will it work on the ground of security? What of new designs? Where private industry is involved, security problems obviously arise.
What of research and development, the second major component of cost effectiveness? How far can the requisite levels of investment in research and development be provided by private industry? Much of private industry, including some companies that contract for the defence capacity of this country, already cannot provide the required levels of investment. Will they be able to provide even higher levels for the Royal ordnance factories?
358 What about the effect on other sectors of private industry which for many years have shared the fruits of research and development at little, if any, cost to themselves? What of the accumulated expertise that has been developed over many years to the cost of the public purse? Will these simply be overlooked as of little consequence? Do not the public have rights when an investment is involved which cannot easily be set aside?
§ Mr. Lewis Carter-Jones (Eccles)Will my hon. Friend develop a theme that many of us who have experience of Royal ordnance factories feel is apposite—that there may be within the Royal ordnance factories a degree of expertise which is required by people outside ROFs who are trying to obtain advanced technology on the cheap?
§ Mr. DuffyI shall gladly respond to my hon. Friend's plea.
I come to another major component of cost effectiveness—the State as an employer. Do the Government wish to reduce the number of civil servants? We know that that is one of the Government's aims. Do they see this as an area that is likely to prove especially productive of that policy objective? The ROFs and similar establishments have an excellent record of industrial relations. They are good employers and have an unmatched record in the promotion of apprenticeships and industrial training generally. They are capable of generating loyalty and dedication to a degree that is unknown in private industry.
When I was at the Ministry of Defence I was not responsible for the ROFs. They were the responsibility of one of my colleagues, but I was invited to look closely at the dockyards, which were my immediate responsibility, and establishments that undertook research and development on behalf of all three Services, with a view to achieving greater cost effectiveness. The pursuit of cost effectiveness must go on within the defence sector, irrespective of which party is in Government.
I reported to the Defence Council that I could not see where any important savings could be made in our research and development establishments. Their record was remarkably good and compared favourably with any establishments that I could find elsewhere, either at home or abroad.
I mentioned the dedication of the men employed in the defence sector. I was referring not merely to the research and development establishments but to the dockyards as well. I felt it necessary to pay tribute to the quality of the men and to their expertise, loyalty and dedication.
I hope that the House will not mind if I relate a story that I heard at one defence establishment, where a worker had asked that after his death his ashes should be scattered in the grounds of the establishment. I do not know where that has happened in the private sector. It is an example of the degree of loyalty and dedication that defence establishments, including ROFs, can generate among their workers. I know the Minister well enough to appreciate that he will set considerable store by that. He cannot operate—any more than could my fellow Ministers and I when we were at the Ministry of Defence—unless he can call on a high level of dedication and loyalty from personnel.
Does the hon. Gentleman think that changes in the direction of privatisation will not be at the expense of that 359 loyalty and dedication—the employer-worker relationship, which is almost unique and which, as far as I am aware, is not repeated in the private sector?
I remind the Minister of the last time that the Ministry looked at the sort of issue that we are considering—the most cost-effective way of deploying establishments such as the ROFs. Only 10 years ago, the Mallabar committee issued a report, and it was open to that committee to make recommendations in the direction of privatisation. But it did not do so. It went no further than to recommend that the future accountability of ROFs should be placed on the basis of a trading fund. If the Mallabar committee was not prepared to go beyond a trading fund, why are the Government considering going further?
In case there are some hon. Members who are not familiar with the Mallabar report, I should say that it was published in 1971 as Cmnd. 4713. Its findings well deserve the study of those who are interested in the future of ROFs. It recommended a trading fund as a basis for accountability. It did not recommend any of the departures that the Government have in mind.
The Minister will know that the Royal Navy in recent months has also looked at more cost-effective ways of meeting the needs of the fleet in the Royal dockyards. I shall not say much more about its findings. These have yet to be debated by the House. I would only say, as I have already intimated, that I am familiar with the problems of the dockyards. Those problems have been considerable in recent years. They have had the effect of inflicting serious penalties on the fleet and on the availability of ships.
My remarks are not intended to be a criticism of the men involved. On the contrary, I consider that I have been paying high tributes to worker response within the defence sector. Such difficulties as penalised the fleet occurred outside management-employee relationships. They were largely a function of traditional structural arrangements and relationships.
Nevertheless, the recent study of the dockyards, like the Mallabar report in 1971, has come up with a recommendation that goes no further than Mallabar and merely asks for consideration to be given to putting the dockyards on an accountability basis that does not run beyond the trading fund. Why are the Government prepared to go further in the case of ROFs?
I wish to remind the Minister of the attitude of the trade unions. My own trade union, the General and Municipal Workers Union, has a great interest and stake in the subject we are discussing. I have discussed the matter with the union. I had a close relationship with it while serving in the Navy Department. I recognise that the Minister and his colleagues are equally concerned to continue the contacts. I think, however, that I can fairly claim that I took new steps within the Navy Department to bring not merely GMWU colleagues into my office to establish close working relationships but also other unions within the defence sector. This was welcomed on all sides, especially by the professional side of the Services and by my ministerial colleagues. I have no doubt that such practice is still continued.
The Minister will be interested to know that the GMWU believes that privatisation would undoubtedly lead to rationalisation followed by unemployment. The union believes that defence work is best performed within the public sector. It has experience that is probably unmatched 360 within the defence sector. It is wholly convinced that ROF should stay as an entity and within the realm of public ownership.
§ Mr. Giles Radice (Chester-le-Street)I wish to declare my interest as a member of the General and Municipal Workers Union. I also have a constituency interest. There is an ROF at Birtley in my constituency to which I shall be referring, because I wish to ask the Minister about redundancies that have recently announced there.
I should like to underline the remarks of my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy), in his very good speech, when he pointed out that we are talking about a success story. We are not talking about something that has failed. We are talking of something that has been doing well in difficult conditions. A recent article in the Financial Times pointed out that ROF sales had doubled to £284 million in the past three years, that over half of ROF output goes in exports—they may be slightly lower this year, but they have, nevertheless, been at a high level for the last three of four years—and that the surplus on operations has risen considerably since 1975.
We are talking about a success story that has operated under a trading fund, as proposed by the Mallabar committee in 1971. The case for such a trading fund, or some modification of the arrangement, is strong if one examines the conditions and restraints under which the ROFs operate. As the Mallabar committee said in its conclusion, the ROFs cannot refuse an order from the Armed Forces. They cannot determine design or quality. They are under a major constraint. When looking for markets abroad, the ROFs must take into account and seek Government approval for obvious reasons. The ROFs are the main national capacity for producing weapons. They are an important asset which must be taken care of.
The solution for the dockyards is almost exactly the same as that for the ROFs. There might be a case for a reappraisal of what has happened. Indeed, the Civil Service unions say that there is a case for examining research and development and procurement. That does not mean that we must go through the type of fundamental exercise that the Government have set up under the chairmanship of Lord Strathcona. The truth is that the idea comes not from the Defence Department but from the Department of Industry and the Treasury. It is an ideological idea. The real motive is to see whether it is possible to sell Royal ordnance assets and factories to private interests.
That would be disastrous. Not only is privatisation a horrible and ugly word, but it is a bad idea for the ROFs. Indeed, it is usually a bad idea. It is a thoroughly bad idea because it goes against the national interest, which is a well-known Conservative concept. The proper Conservative course is to keep the ROFs under the trading fund arrangements.
Redundancies have taken place at Birtley in my constituency. The ROF there is facing serious problems, including the cancellation of the Iranian order, the drop in overseas sales and the world recession. It is disturbing when, a few days before Christmas, 200 redundancies are announced at a factory that has a good reputation for industrial relations and productivity and against a background of high unemployment. We are talking of a constituency where the unemployment level is about 15 per cent. It is serious when 200 people are thrown on to 361 the labour market and into the dole queues. The Minister should tell the House more about the background to the decisions. Will he explain to my constituents, to the General and Municipal Workers Union and to other trade unions at Birtley why the Government have chosen Birtley and two others from among all the Royal ordnance factories?
In conclusion, the Government's approach to the ROFs is either a largely cosmetic exercise in reducing the number of civil servants by hiving off—which is a bogus exercise and has unnecessarily alarmed not only trade unions and employers but management—or it amounts to the selling of assets and factories to private interests, a highly damaging move which will have been taken for purely ideological reasons and which will be against the national interest. Either way, it cannot be claimed that this fundamental study will have done anything positive to ensure that the ROF organisation improves its performance, productivity, research and development and sales operation and that it better fulfils its defence obligations.
I hope that the Minister will reassure us tonight that the Government have come to their senses and that they will stick to the present arrangements.
§ 9.2 pm
§ Mr. Jack Straw (Blackburn)I declare an interest as a member for the General and Municipal Workers Union and a parliamentary adviser to the Society of Civil Servants. I hear that my hon. Friend the Member for Pontypridd (Mr. John) will declare a non-interest in the General and Municipal Workers Union. We all deprecate that.
I speak this evening as the Member for Blackburn. The Royal ordnance factory in Blackburn is the largest single employer there. Its workers come not only from my constituency but from Darwen and Accrington. I am glad to see my hon. and learned Friend the Member for Accrington (Mr. Davidson) on the Front Bench as a defence spokesman. He wishes to be associated with my remarks.
We hear a great deal in the House about the present policies of the Government as compared with those followed in the 1930s. During the 1930s, my constituency became the unemployment black spot of the North-West. In the early 1930s, unemployment rose to 45 per cent. Unlike other areas where there was a gradual recovery in output and employment towards the end of the 1930s, unemployment in Blackburn remained high. Even in 1938 there were 17,000 on the dole, compared with today's figure, high though it is, of 7,000. It remained high until the town decided to pull itself up by its boot straps and went out to sell the attractions of the town—a large supply of labour, a labour force that showed unrivalled co-operation with employers, and unrivalled industrial relations. As a result, it attracted two major firms to the town—namely, Philips, which established what became the largest valve-making factory in the world and once employed 6,000, and the munitions factory, which became the Royal ordnance factory and which now employs just under 3,000. Mullard and the ROF remain the two largest employers in the town.
World factors and, above all, the Government's economic policy have led to a reduction in manfacturing output back to the levels of 1967. As a result, the whole 362 area of North-East Lancashire has been hit extremely badly during the past 12 months. The textile industry has been hit, but there is still substantial employment in textiles. The textile engineering industry in Accrington has been hit. General engineering has been hit, and so has electronics. The result is that unemployment across North-East Lancashire has at least doubled in the last 12 months. It was 5.2 per cent. in Blackburn 12 months ago. Today it is 10.6 per cent. In the constituency of my hon. and learned Friend the Member for Accrington it has risen even higher and in places like Bacup it has actually trebled in 12 months.
We expected that that devastation would occur under this Government, following the manic monetarist policies pursued by the Prime Minister and the Secretary of State for Industry. We thought that because we had read the Conservative Party's manifesto.
Also in that manifesto, however, was a clear and categorical pledge to increase defence spending. We may argue about whether that was justified. Many of us feel that it was not. Nevertheless, that pledge to increase defence spending was there. Time after time, the Prime Minister has defended at the Dispatch Box the increase in defence spending, even though at the same time she has cut back on spending in every other area, including the real level of unemployment benefit.
Given that other pledge in the Conservative manifesto to increase defence spending, we in North-East Lancashire thought that every cloud had a silver lining and that at the very least employment in defence-related industries would be protected. Indeed, it was at the beginning. Earlier this summer, in anticipation of that increase in spending, the Royal ordnance factory in Blackburn took on between 60 and 70 extra staff to meet the expected increase in orders arising from the increase in spending.
Then, as a bolt from the blue, on 8 August this year the Government announced a wholly unprecedented moratorium on the work of the defence industries, including the Royal ordnance factories. That moratorium was to last for three months. It lasted until 3 November, but even then, when it was lifted, the Government announced that further stringency would continue. Lord Strathcona wrote in a letter to me:
We recognise that many companies who have been expecting further orders may, therefore, be disappointed and that for some the consequences could be serious.Lord Strathcona was right when he said that the consequences could be serious. Yesterday, in Blackburn, the first slice—I regret to say that it is only the first slice—of redundancies was announced at the Royal ordnance factory:200 industrial workers and 14 non-industrial workers to be declared redundant by next April. On top of that, it is the belief of the trade union representatives in Blackburn that due to natural wastage the ordnance factory will in fact secure a job loss of 300 by next April, because there will be no filling of existing vacancies in the meantime. They calculate—and I should be delighted to hear the Minister contradict this—that that will add a further 100 lost jobs.The Government's strategy of apparently pouring extra money into defence spending while at the same time creating greater chaos and a greater crisis in the defence industries than at any time since the war has caused concern not just to Labour Members who represent constituencies with defence industries but also to the Association of British Chambers of Commerce, which, I 363 fancy, was an erstwhile supporter of the Government, although that support evaporated some time ago. In a paper published just a month ago, entitled "Sense in Defence", the association said:
This paper criticises the Government's current approach to defence procurement on two grounds: first that the defence of the realm is being jeopardised by ill-conceived decisions; second, that theoretical considerations are being given priority over industrial reality.The Association of British Chambers of Commerce—not of trade councils, but of chambers of commerce—went on to say that the present Government werenot adopting a coherent and properly thought out policy towards the defence industries.That is exactly right, because, I am sad to say, the 200 redundancies that have been declared are only the first of what I see as a continuing contraction of employment in those industries.I say that because when Lord Strathcona wrote to me about the redundancies at ROF Blackburn he said:
It is also possible, I am afraid, that further substantial reductions may be necessary in the latter half of next year. We are not yet able to forecast the factory's workload at that time but the position will be reviewed in April or before.The trade union representatives in Blackburn have consistently acted responsibly in order to secure good industrial relations. They are not scaremongers, but their serious estimate is that a further 600 jobs at the ROF Blackburn are at risk. If that is so, employment will have been cut by well over 25 per cent. in one year.My hon. Friend the Member for Chester-le-Street (Mr. Radice) spoke of the drop in orders from abroad, particularly those from Iran. The ROF in his constituency does different work from that in Blackburn. While we accept that the increase in the value of the pound and the Iranian problems have caused difficulties for the Royal ordnance factories and their order books, my understanding is that in Blackburn—I speak only for Blackburn—the fundamental cause of those redundancies is not the export situation but the moratorium on orders from the home defence and the Master-General of the Ordnance. The possibility of additional redundancies also arises not because of the export situation but because of the cutbacks that have been made by the Master-General of the Ordnance, which have been forced on him as a result of the most extraordinary incompetence and mismanagement by the Government, who have a rising defence budget but at the same time can plunge the ordnance factories into the most serious employment and economic crisis which they have ever faced.
That mismanagement in itself has created enough uncertainty among the ordnance foactories. But on top of it, instead of trying to secure certainty for the employees in terms of the future of the ROFs as an organisation, the Government have thrown the whole works of the ROFs into the air by a second piece of astonishing irresponsibility.
Many hon. Members will accept—I personally do not—that there could be a case for having some kind of nationalised corporation that is subject to the requirements of the Ministry of Defence. We can discuss that across the Floor of the House. But that is not what the study group has been asked to consider. Among other things, it has been asked to look at the possibility of selling off the ROFs as a going concern in their entirety or split into two groups and, even worse, selling the assets piecemeal to interested industrial purchasers. It is that which above all has caused the greatest anxiety to my constituents and to the 364 constituents of all my hon. Friends who represent Royal ordnance factories. They fear that those who put money into the Conservative Party are now seeking a return on it. The fear is that such people wish to take over the ROFs bit by bit. If they do so in the name of so-called rationalisation in order to eat up a competitor, the fear is that the labour will be shed greatest in the parts that are taken over.
Lord Strathcona explained to us that the study group would not report until January. However, can the Minister say whether Lord Strathcona has already decided that it would be irresponsible and against the interests of the nation and its defences even to contemplate selling off the ROFs either piecemeal or as going concerns?
Although we can have arguments across the Floor about the nationalisation of other companies, never before has there been any suggestion whatever but that the ordnance suppliers to the Army, which is an essential part of our military machine, should be within the Ministry of Defence. I understand that the Royal dockyards have been within the Ministry of Defence and its predecessors for four centuries. Even in the eighteenth century, when many other aspects of ordnance were put out to private enterprise, when, as Boswell's diaries record, the Master-General of the Ordnance made hundreds of thousands of pounds out of bribes that he received for favours in the placing of contracts and when the kind of manic monetarism of the present Government was running riot, the Royal dockyards were within the Government estate. Since 1938, when the ordnance factory at Blackburn was set up, there has never been a suggestion that that factory should be sold to private enterprise. Not even a Conservative Government had the audacity to place the interests of their own narrow ideology above the interests of the nation. That applied until the present Government took office. We face a Government who are willing to abandon the interests of the nation in the pursuit of a narrow monetarist and now failing creed.
I ask for undertakings and information from the Minister about, first, employment in the ordnance factories. Why is it that the ordnance factories face the most serious employment crisis since the war? Why is it that the Royal ordnance factory at Blackburn is having to shed 200 jobs and faces the possibility of shedding many more when defence expenditure, as we are told, has risen? How are the Government creating this sorry pass?
Secondly, I ask the Minister to inform the House of the progress of the Strathcona study group. I know that the group has not yet reported, but, bearing in mind all the uncertainty that the Government's policies have created in the ordnance factories, the Minister owes it to all the dedicated men and women in those factories throughout the country to say that the one thing that the Government will not do is sell important national assets piecemeal to private companies and create further uncertainty and distress where already they have created a great deal.
§ Mr. Den Dover (Chorley)There is a large Royal ordnance factory in my constituency, which employs about 3,500 workers. Over the past few months 50 of those workers have written to me about the Strathcona study group. They have put their views carefully and considerately to me. I am one of the strongest supporters of the Government's policies for privatisation, but I have replied to the effect that I should like to see a company set 365 up along the lines of British Petroleum, with 51 per cent. Government ownership and 49 per cent. ownership in the private sector. By those means the Government could guarantee a continued supply of armaments and at the same time ensure that export orders were carefully controlled.
Last Friday I met 50 of the white and blue-collar staff, including the director of the establishment. I listened carefully through a one-and-a-quarter-hour meeting to their views. My views have shaded a great deal, and I find myself in great sympathy, much to my surprise, with Labour Members. I should like to see the trading fund continue, but with important changes made to it.
We have heard Labour Members speak of the good track record of the Royal ordnance factories. That is a major factor in my thinking. We should not make any changes to an organisation that has been a success story over the past few years, especially at a time of mounting unemployment. What is the point of making major changes? Surely it is better to give a degree of continuity to the organisation and to make changes that will lead to greater efficiency. If that means bringing in the best brains in the Government or outside management consultants to recommend what should be done, let us follow that road.
The main view that came across during the meeting that I had with 50 white and blue-collar staff was the need for wider scope for recruitment of staff at all grades, instead of its being within rigid Civil Service confines. The need was expressed for a research and development organisation within the ROF organization, as outlined by some Labour Members, and the need to establish a marketing organisation.
I have the greatest confidence in the ability of the ROF organisation to do more than merely compete in world markets, but we must make sure that the maximum available market is open to it. If that means the ROF setting up its own marketing group, so be it. I should welcome that move, because it could then the better adapt to world markets, making sure that its production runs were efficient.
Therefore, this evening I am speaking in support of a continuance of the trading fund. By all means let there be some improvements, but I feel that the Government should bend their mind towards that point of view and dismiss the scare stories which were circulating before the general election about what we would do to the Royal ordnance factories and which have increased over the last few months in view of the recent study group announcement.
§ Mr. Joseph Dean (Leeds, West)About a fortnight ago I had the opportunity of speaking in a Supply day debate on the engineering industry. In some respects, this debate has a relationship to that debate. In that debate, the Secretary of State for Industry, with the usual clichés, was saying that the success of business and manufacturing industries was based on a stable labour record, wages that were not too high and adequate production performances. When we are talking about the Royal ordnance factories, I suggest that they have conformed with those criteria.
In that previous debate I said that I was not a pacifist and that I had always believed that any Government of this 366 country had a right and responsibility to provide, within the global sum of money available, an adequate defence for the people of the country.
I spent my time during the last war as an apprentice producing armaments of various kinds to stop the Nazi attack. The new terminology used by the generals and other officers today when they talk about maintaining adequate supplies is "logistics". That is the "in" name. But they have to have the logistics available to carry out the function which this Parliament and those whom we represent expect them to do on our behalf.
Upwards of 70,000 people are involved in the Royal ordnance factories. They have a track record of very good industrial relations, very good productive performances and reasonable wage levels. There is no reason why they should be subjected to examination by political ideology based merely on that.
I have been in correspondence with Lord Strathcona on this subject. It surprised me to see the make-up of the people involved in the study group. I expect that Conservative Members and I differ, because we are of two different political philosophies, but I think that responsible Conservative Members, even now, though they may support the Government's general policies towards industry, accept that a major component of any industry is its work force. When I wrote to Lord Strathcona and asked him about the people who were on the study group, I found it odd to learn that no one who was either a full-time officer in the trade union movement or a person representing the grass roots at the shop floor level had been invited or requested to be part of the group or had been appointed as a member of the group, to represent over 70,000 workers.
As a former shop steward with a record of responsible negotation, I find that whole approach completely illogical. By it, the Government have injected into those who in the event of an emergency in Europe would be called upon to prime the pump, work overtime and provide the logistics a feeling of uncertainty and mistrust where previously it did not exist.
My hon. Friend the Member for Blackburn (Mr. Straw) referred to tank production and the cancellation of the Iranian order which threw that production into jeopardy. I believe that that position has now been somewhat resolved. However, there is one aspect, not connected with the ROFs, with which I ask the Minister to deal. It concerns a comment by one of my hon. Friends—not in this debate—with which I disagreed. I was one of those who went to watch Exercise Crusader. I was disturbed to hear my hon. Friend say that the performance of our tanks was not up to standard. That was not my impression. Will the Minister deal with that?
The cancellation of the Iranian order meant a massive loss of export production that would have kept that side of the ROFs completely occupied. I understand that the slack has now been taken up and that those who work in the factories have reacted accordingly.
We come back to the scale of wages. During a visit by me to Army establishments last year, after the Minister's visit to the garrison in Berlin and to BAOR, I heard criticism from some in the Army of engineering workers who were engaged in a peripheral strike. They went on strike for one day one week, one day the next, and two days the week after that, but then it ended. It was suggested that their action was of critical importance. For years those engineers had not been involved in industrial 367 action, and when they took it it was at a minimum level. Yet they were said to be jeopardising the capacity of the factories to do the job that the politicians were demanding. The people in the Army said that if they were called upon to defend the country they would not have the tools to do the job.
The Government have dealt handsomely with pay for the Armed Services. No one could cavil at that. It was suggested that the strike by civilians who serviced the nuclear strike force at Lossiemouth affected our capacity to involve ourselves in a nuclear strike. When I told the sergeants who were manning the tanks and guns in West Germany that these men were taking home just £50 a week, they agreed that that was a ridiculous sum. If the Government are not careful in their handling of the matter, they will erode a major foundation stone of the capacity to provide the logistics for our Army to be able to defend us. There is no point in saying that we can entrust it to market forces. Defence is not a market force.
Last year, an all-party team was shown the Harrier strike jet force. We were told by the air vice-marshal in charge of that strike force that it was being jeopardised because of the engineers' action and because of the possible non-provision of a particular pump that was used in the Harrier jets to lower temperatures and to allow that plane to do the job for which it was designed. I asked the air vice-marshal which companies supplied the pump. To my amazement, he said that there was only one supplier—an American company. If that American company decided that it was no longer an economic proposition to produce that pump, we would have no capacity to put the Harrier jets in the air. At the same time, there was no criticism of the way in which we organised our defence—I make no particular criticism of the present Minister or his colleagues, because the problem has obviously been there for some time. I believe that the defence of this country should be in the control of hon. Members on both sides of the House.
I do not place my trust in the private market to provide the defence of this country, based on patronage or patriotism. In 1973, the then Prime Minister, the right hon. Member for Sidcup (Mr. Heath), was in difficulty over the question of energy supplies. One of the greatest parliamentarians of all times, Sir Winston Churchill, having decided that the defence of this country was of supreme importance, instructed 51 per cent. of BP shares to be bought on behalf of the nation to provide the logistics to prime the war machine if necessary. But what happened to the right hon. Member for Sidcup? He was told by the chairman of BP that, although the Government held 51 per cent. of the shares on behalf of the taxpayers, they would have to be treated like any other commercial customer. That is an odd approach to the defence of the realm. That is what the argument is about. I do not believe that the private sector has shown its capacity to prove its patriotism and place the well-being of the nation above profit and personal greed.
Some of the people employed in these factories are grandfather, father and son. They move into these industries because they are immutable, and they are identified in the area. The sons are recruited when they leave school, and to them it is a secure future. But it has not been a rewarding one financially because the disciplines within the wage negotiations are far too rigid, although perhaps in some respects correct.
368 I had left school when the last war broke out, and I was old enough to see the appalling consequences of armed conflict at that time. If we are ever in such a position again, that conflict will be made to look like the Wars of the Roses by comparison because of the way in which the capacity of one nation to inflict damage on another has progressed. But it is a ball game that we cannot run away from; we have to be in it.
Whenever I have visited defence establishments, I have done so on the basis that I am not a pacifist. I was not sent here to support a policy that would render this country defenceless. We are talking in the main about factories that have been developed to the point at which their technological achievements are as good as those of similar establishments in any country in the world. I am not too happy about the fact that they have to have an export capacity, but that is one aspect of the world in which we live. These establishments, which employ about 70,000 people, have been an insurance policy against any sudden attack upon this country. We have been able to rely upon them to provide the minimum logistics to give our lads—and the generals commanding them—a chance to respond.
If the Government intend to monkey about with those establishments and are talking in terms of selling them to multinational companies, they will be reneging on the job that they were sent here to do. If they carry out such a policy, it may be that nothing adverse will happen, but if something does happen the Government will have done something for which they will be damned for evermore by the people of this country.
§ Mr. Brynmor John (Pontypridd)The whole House is grateful to my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) and to my other hon. Friends who initiated the debate on the Royal ordnance factories. That the subject commands fairly widespread interest in the House is shown by the fact that, in addition to my hon. Friends on the Back Benches, my hon. Friend the Member for Renfrewshire, West (Mr. Buchan), who is on the Government Front Bench, has been present during the debate.
It is appropriate that I should resume my responsibilities in defence matters in this debate, because it stresses the interdependence of defence where military and civil employees co-operate to provide essential components in the total defence package. That is essential.
I should like to refer to two paragraphs in this year's defence White Paper that pay tribute to the staff concerned. Paragraph 629 pays tribute not only to the loyalty of the staff but to the high skills that are to be found in the Royal ordnance factories. In paragraph 631, praise is given to the commitment of the civilian staffs and to the closeness of identity with the Armed Forces that is found in those factories. If that degree of commitment and that closeness of identity with the Armed Forces exist, those employed there are entitled to look to the Government to minimise the uncertainties and worries to which they are being subjected.
My hon. Friend the Member for Chester-le-Street (Mr. Radice) mentioned recent redundancies in his local factory. That is in addition to the fact that over the years the work force has been shed, largely with its cooperation. I criticise the Government, because it is a pity—to put it no more harshly—that completely 369 gratuitously, and in pursuit of ideological purity, they have added to the uncertainties felt by the staff by the announcement of the study group that considered the future organisation of ROFs. As my hon. Friend the Member for Blackburn (Mr. Straw) made clear, the real reason for the review is consideration of the doctrine of privatisation. As my hon. Friend the Member for Chesterle-Street said, that doctrine is as ugly in name as it is in conception. I speak from the Front Bench when I say that in the case of defence that doctrine meets with thorough disapproval, just as it meets with disapproval in other areas.
I criticise this exercise because of its worrying effect on the staff at a time of high unemployment. The staff's devotion to duty and efficiency is exemplary. Although this measure may make sense to eccentric economists and may be a manifestation of their ideology, it does not make sense in real economic or defence terms. The ROFs are subject to the trading account principle, which was first introduced by the Conservative Government of 1970–74. It was developed by my right hon. Friends when the Labour Party was in office.
As the hon. Member for Chorley (Mr. Dover) said, some slight modification may be needed. However, we are in danger of throwing out the baby with the bath water. For want of bringing the accounting system up to date, the Government will destroy all that is good in ROFs. I shall quote from the report of the Comptroller and Auditor General, which is in the trading fund accounts for 1978–79. Those accounts were the last accounts to be laid before the House. The report states that the accounts
For the year ended 31 March 1979 show a surplus of nearly £37 million after interest, on sales of £284 million.The trading fund is a means of indexing efficiency. On any measure of efficiency, that would seem to pass the test.The hon. Member for Chorley made an initial suggestion, although he later moved away from that argument. He suggested that arms exports were bound up with this issue and mentioned the possibility of greater exports if private capital were used. Often, the volume of exports is controlled by what we conceive to be our national interest. It is not a completely free market. There is strong national control, which cannot respond merely to market forces.
It is paradoxical that the Government should cut the defence budget with one hand and—if we are right to assume that they are looking longingly at privatisation—try to introduce private enterprise into the defence budget with the other. That feat has probably not been equalled since Thomas Cook and Sons managed Army transport in the Crimean war.
The proposal does not make military sense. The objects of the ROFs are set out in paragraph 1 of the accounts. It states:
The Royal Ordnance Factories' task is to meet the munitions requirements of the Services and undertake approved work of a defence nature for Commonwealth and other friendly Governments.Clearly, the military establishment must feel it necessary to have a strong degree of influence and direct control over what is produced and what quality of work is being done. I believe that it must be worrying to the Defence Staff that the control over this area, which is one of the most sensitive in defence matters, is likely to be diluted if the Government's scheme goes through.370 Is the Minister able to assure us that the Chiefs of Staff are satisfied that privatisation is compatible with our defence requirements, or may we see yet another delegation from that august body going to No. 10 Downing Street at a later date to express its doubts on that score? Logic and sound economic and military sense dictate that whilst there might be room for improvement—there always is in a dynamic organisation—there should be fundamental change in the concept of the way in which the ROFs are organised. If there is, it will be to the detriment of our defence effort.
The Minister and I have from time to time read the same briefs. I expect that he will say that this speculation is premature, that the report is not yet completed and that even when it is it will have to be considered by the Government. Will the hon. Gentleman give an undertaking that when the report has been completed it will be published and debated in the House before the Government make their final decision on the matter? The concern of hon. Members on both sides of the House must be taken as completely genuine. If the Government are sincere in the plaudits that they have lavished on the staff of the ROFs, they owe it to those loyal staff to enable their parliamentary voice to be heard before their decisions are taken irrevocably and above their heads.
§ The Under-Secretary of State for Defence for the Army (Mr. Barney Hayhoe)I welcome the hon. Member for Pontypridd (Mr. John) as Opposition spokesman on defence. I suspect that the case he had to deploy was one that he could have done without looking over his shoulder. I am not certain whether on the defence issues that will come forward he will speak so wholeheartedly on behalf of the Labour Party as he did tonight. No doubt days of controversy lie ahead.
I regret the departure from the Front Bench of the hon. Member for Sheffield, Attercliffe (Mr. Duffy), whose contributions to debates on matters concerning the Royal Navy have been respected and listened to with care by hon. Members on both sides of the House. I have no doubt that we shall hear from him from the Back Benches on a wider range of defence issues.
A number of ROFs have been referred to tonight by hon. Members who have indicated their personal interest in them. I think that I have a claim that predates many of those hon. Members. More than 30 years ago, as a young draughtsman and then a junior engineer, I went from the Ministry of Supply to the Blackburn ROF and to the Royal ordnance filling factory at Chorley. Tributes were paid tonight to the work done by the ROFs. From my experience over many years as an engineer and now as a Minister in the Ministry of Defence, I can wholeheartedly and sincerely emphasise and reiterate the tributes which have been paid to the work done in the ROFs. I knew the present managing director at a much less senior level. It was interesting to find when visiting Blackburn that that factory is still making something which I designed. I am not sure whether that is in line with the tribute that I was paying. Alternatively, perhaps I was lucky in the piece of mechanism with which I was involved at that time.
However, in paying tribute to the industrial and non-industrial workers in the ROF organisation, I recognise the anxieties, which were reflected in many of the speeches, about the uncerainty. I accept the comment about the personal problems that flow from the announcement of 371 redundancies at Blackburn and Radway Green. The timing was decided by the management of the factories. One understands the difficulties that such announcements just before Christmas cause for those who may be involved and for their families and friends.
The ROFs have had a traumatic time in the past couple of years. They have lost a massive order worth over £1,200 million, which is about four times the annual turnover of the entire organisation. It is a remarkable tribute to the factories that they have been able to carry on business without the loss having too great an adverse effect. A reduction in staff resulted at the Leeds factory from the loss of the Iranian order. To some extent, the present redundancies are a knock-on effect of the loss of the ammunition orders that would have accompanied that major tank order.
That is not the only difficulty with which the ordnance factories have been faced recently. Frankly, industrial relations in recent years have been less harmonious than the steady and extremely good relations that they had over a long period. I do not say that critically. I merely note it as another problem. About 20,000 working days were lost in 1977–78, 50,000 in 1978–79 and between 80,000 and 90,000 in 1979–80. but already in 1980–81 well over 120,000 days have been lost. However, nearly all the days lost were at one factory—Bishopton. Apart from that one dispute, this year has probably been the best ever for industrial relations in the ROFs. It was a significant dispute, which led to shortages of ammunition at home and may have had an effect on orders overseas.
Times have changed since the years between 1975 and 1978, when we had a rising work load, a buoyant market and profitable business being done by the factories. In 1976 and 1978 the ROFs gained the Queen's award for exports. That buoyant market has been replaced by a loss of orders, less harmonious industrial relations, a decline in profit and a decline in overseas orders.
The hon. Member for Attercliffe said that for many years the factories have been exporting more than half their output. Alas, that has not been true in the past year, and I fear that it will not be true this year either. There has been a marked change in prospects.
§ Mr. Joseph DeanThe Minister referred to industrial relations. Is it not a fact that under both the previous and the present Governments industrial civil servants have lost ground compared with others employed in Government establishments and those in the private sector and that therein lie the seeds of the industrial unrest?
§ Mr. HayhoeThe hon. Gentleman does not understand the position. Among the great difficulties have been militancy and strikes and the days lost as a result of action by non-industrial staff. At Bishopton, that was at the root of the difficulties. I do not wish to re-run the problems. I measured my words with care. I did not seek to impart blame but merely to draw attentiion to the fact that the overall environment in which the ROFs are operating is nowhere near as favourable as it was some years ago.
There has been a fall of 1,300 in the work force in the past 18 months, largely as a result or the loss of the tank order at Leeds. A second major reduction in the work force, with some additional redundancies, seemed inevitable. Negotiations will take place with the trade unions in the new year. The established procedures and 372 agreements in redundancies will be implemented and the normal compensation and superannuation payments will be made.
Regrettably, the prospects for future orders for the ROFs do not look particularly good. It was against the background not of the buoyant, profitable, easy-to-get-business atmosphere of the 1975–78 period, but of the much less agreeable atmosphere in which work is hard to find and there has been a sharp fall in the proportion of export work that the Government thought it right to review the whole situation. A study group under my noble Friend the Minister of State is considering the future development of the ROFs. Several options are being assessed objectively to determine where the balance of advantage lies.
It would have been possible for the study group to rule out certain options at the beginning, but it would not then have been an objective study group. It would have been shot at for not looking at all the possibilities. It is right that the group should consider all possible options. Matters have been discussed with the trade unions and staff associations concerned and their evidence is being considered carefully.
The hon. Member for Leeds, West (Mr. Dean) said that there was no trade union representation on the study group. Perhaps he is not aware that my noble Friend the Minister of State discussed the matter with the national officers of the trade unions and staff associations concerned on 15 October, when it was mutually agreed that it would not be appropriate for them to be represented on the study group, though they accepted my hon. Friend's invitation to submit written evidence.
The study group is expected to complete its task soon. Its report will have to be considered by the Government and the House will be informed of the outcome as soon as possible. Subject to the nature of the report and the views of colleagues, the next step will probably be the issue of a consultative document, as has been the case with similar studies. The hon. Member for Pontypridd will know only too well that I am not in a position to say whether there will be a debate in the House. The hon. Gentleman knows equally well that, if there is a widespread demand for a debate, a debate will be held. I would not shrink from being prepared to debate these issues at any future time.
Opposition Members have expressed their suspicions. I think that sometimes they let their suspicions run away to an extent that may have generated unjustified anxieties among people working in the ROFs. This must be a matter for them. They can riposte that the fact that the study is being held is the basic cause. I understand that view. I am appealing, in speaking in these terms, for total moderation in what we now say about the study until it comes out. It will come soon. At that time, we shall be able to debate the reality of the position rather than fears and worries about it.
§ Mr. JohnI cannot allow the hon. Gentleman's account of the cause to pass. His hon. Friend the Member for Chorley (Mr. Dover) had matters in the opposite sequence. That is my hon. Friends' understanding of the situation. It is the anxiety of people working in the ROFs that has galvanised hon. Members to raise the matter in such terms and not in the opposite direction.
§ Mr. HayhoeI hope that I was not expressing myself in any emotive sense. I have stated during the debate that 373 the genuine anxieties of people working in the ROFs had been reflected in the speeches heard from both sides of the House. I understand those anxieties. I hope that hon. Members will not exacerbate them by predicating and seeking to prejudge and arouse alarm about what may or may not be recommended. Is it not wiser, when we are approaching the end of the matter—the study group report will be completed fairly soon—to await the report and then debate it?
I can assure the House that it is a genuine study that looks at the changed environment in which ROFs are now having to operate. We shall be looking to see whether greater freedom is necessary and whether there should be fewer restraints on the ROFs, which are inhibited about going out and getting business for themselves and a share of the market, and making commercial arrangements with people in the private sector. I want all these matters to be examined.
I believe that the purpose is to try to ensure that the end result, however it turns out, will provide a more certain future for the ordnance factories and for those who work in them. We should not seek to prejudge the report, as I have been asked to do today. One is asked to say that the products of the ROF—the munitions, the tanks and vehicles and things of that kind—can come only from a Government-run and Government-owned factory. That is blatantly not the case. The factory I know best at Blackburn makes fuses. During the war, fuses were made by firms in the private sector. There is no certainty that the best solution is that stores and equipment should be made by a firm in the Government circle. What about communications? We get communications from private industry. What about aircraft? What about guided weapons? Often it is a blend of publicly owned and publicly run and private enterprise companies.
There should be no prejudging of the matter. I hope that an atmosphere of gloom will not be created about future prospects. There has been a good recovery this year following the terrible shock of the loss of the Iranian order. The Jordanian order for ammunition and tanks is welcome. Without that order, the redundancy position would be much worse at Leeds and elsewhere. The Government made a commitment to the Challenger programme, which must have given heart and comfort to workers.
My noble Friend will study all that has been said in this useful debate. I shall ensure that the Hansard report of the debate is circulated to all members of the study group so that they can take full account of the views expressed tonight.