§ Motion made and Question proposed, That this House do now adjourn.—[Mr. Cope.]
1.10 am§ Mr. Mike Thomas (Newcastle upon Tyne, East)I wish first to set out the employment—or., rather, unemployment—background on Tyneside and in my constituency.
Male unemployment in Newcastle is now 19 per cent. or about one in five, and female unemployment 9 per cent. or about 1 in 10. According to a study by Newcastle city council, in my part of the city—the east end —male unemployment is now 23 per cent. and female unemployment 12 per cent., compared with 14 per cent. and 7 per cent. in 1978. In other words, unemployment has nearly doubled since the Government came to office. In the Walker ward, which includes the two Swan Hunter shipyards, male unemployment is now 34 per cent.—one man in every three is out of work—and overall unemployment is 27 per cent. and rising. In Consett, a much talked about and much troubled area, male unemployment is 31 per cent. and overall unemployment just over 25 per cent. and falling. Walker has become the new Consett of Tyneside. The problem for young people is even more severe. About half—48 per cent.—of males under the age of 20 in Walker have no permanent job and find none within a year of leaving school.
In 1964, the shipyards in my area employed 11, 700 people. They now employ fewer than 6, 000. The effect of that is amply illustrated by the statistics for skilled unemployment. In the United Kingdom as a whole, only 15 per cent. of the unemployed are skilled workers. In my constituency the figure is 49 per cent.
I should also set out the defence background to employment on Tyneside.. Five years ago, Vickers employed 7, 000 or more. It now employs between. 400 and 500, all dependent upon overseas orders and most of them on short time for the past 18 months. At the Royal ordnance factory in Birtley there were 250 redundancies just last year. At Marconi, despite the Sea Wolf order, 290 out of the 650 workers are to go. Not a job has been saved by a £14 million order. At Swan Hunter, about 8, 000 are currently employed, about 60 per cent. of them—some 5, 500—on warships. We already know from the chairman of British Shipbuilders that even on present plans the 5, 500 will fall to 3, 500 by 1983–84. Support firms by the score which make ancillary equipment for tanks, fighting vehicles and so on, are equally affected and the employment implications of the cuts in defence spending are very serious.
I wish to concentrate on the situation at Swan Hunter and I am grateful to the Minister for agreeing to answer the debate. The order book on the merchant side extends to about £550 million. On the military side, there are the through-deck cruisers and HMS "York", the stretched type 42, all moving towards completion. The order book extends to about 1985. It is one of the longest in the ship building industry, but it is also one of the most vulnerable. If the Trident programme pre-empts the surface ship budget in the way that the Government seem to plan, the tap will be turned off at Swan Hunters for 5, 500 men.
Naval orders for British Shipbuilders as a whole in 1981 stood only at £270 million as against the expected £440 million. The chairman of British Shipbuilders said in 723 evidence to a Select Committee of this House that of the 33, 000 current warship work force, in British Shipbuilders as a whole, 45 per cent. or 16, 000 must go by 1986 on current plans. I am anxious that the Ministry of Defence recognises that problem now and seeks to deal with it. It cannot just wash its hands and play Pontius Pilate in all of this; it has responsibilities to my constituents, who served it so well for so long.
It is no good the Government saying that British Shipbuilders should seek exports. Constant development and one-off re-specification make it almost impossible to develop an export business in warships. By refusing to release MoD ships in build to meet export orders when they do come, they compound the felony. The Dutch, German and Italian navies do not make these selfish mistakes and I would like the Minister to tell us why our Navy insists on behaving in this fashion.
By demanding the attention they do for their existing orders, the Government inhibit Swan Hunter from developing expertise in non-naval work that it desperately needs to acquire. An example of that is the P amp; 0 order, that went to Finland at the end of last week. Will the Minister tell us how far his Department went in easing its pressure on the naval work at Swan Hunters to allow the yard to fit the P & O boat in? How far is it consciously planning to help the yard make the smooth transition to merchant work, if that is to materialise? How far will it programme the existing orders to avoid any sudden cut-off in naval work? In particular, can he give assurances that the hoped-for Fleet support tanker orders will come in 1983? Will there be more type 42 orders for Swan Hunter?
It would be unfair to the Minister if I laid the whole problem at his door and I readily acknowledge that it is not entirely a problem for the Navy. However, I hope that the Minister will agree about the Navy's responsibilities in it.
We must also ask British Shipbuilders on what grounds it decided not to compete for the P amp; 0 order when there are 600 outfitters on the dole in Newcastle and vacant berths in the yards in my constituency as well as elsewhere, and a dire need to gain experience in the type of work that the P amp; O ship represented. How did British Shipbuilders make its decision not to compete? Did it ask the Navy for adjustment of completion times? What is the Government's overall strategy in all of this? Was it simply the truth that the order was not profitable enough? Surely the Government should understand that that is not the first priority in these circumstances. I suspect that that order was sacrificed on the altar of the public sector borrowing requirement and on some false search for an artificial and short term profitability for British Shipbuilders.
I hope that the Minister can answer these questions tonight. They were raised with me by my constituents and the Northern region of the TUC and are important questions. All in all, I do not want us to simply look back. I want some indication that the Government, in general, and the Ministry of Defence in particular, are considering my constituents' future. If steps are not taken now to secure that, shipbuilding north of the Tyne will be exposed and unprepared for the world market in two or three years. Thousands of jobs will be at risk, as will a major part of Britain's warship building capacity. It is not in my constituents' interests—whether they work or hope to work in the shipyards—or the interests of the Government, the Navy or British Shipbuilders.
724 The Government's approach so far has been woefully inadequate. Labour's commitment to the cuts in our defences were probably even worse, with even more jobs lost. However, we are talking about jobs in a constituency where half of the skilled men and youngsters do not have a job. On the present plans, by 1985, that position will be materially worse unless the Government take steps to deal with it. It is not good enough for the Navy to say "We want the yards to compete and tender. We want to work with them to get what we want out of them at the time we want our ships delivered. Whatever else happens to British Shipbuilders is none of our business." It is a vitally important component of the Navy's responsibilities, if Swan, Hunter is to make the transition that seems planned for it, that the Government should now start planning to help. I hope that they will start by giving an indication tonight, through some hard and positive replies to the questions that I have asked. It will be no good coming to the conclusion in 1985 that Swan, Hunter has a problem. What we do not do now will not be done in time.
§ The Under-Secretary of State for Defence Procurement (Mr. Geoffrey Pattie)The House will be grateful to the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) for giving us the opportunity of having this short debate. I congratulate the hon. Gentleman on his customary and cogent manner in presenting his argument.
I think that, before I turn to the specific issues raised under the subject of the debate, it would be helpful to the House to recall that the prime function of defence procurement expenditure is for the research, development and production of equipment for the Armed Forces. The defence industrial base of the United Kingdom was created specifically in order that the equipment needs of the Services might be satisfied, and not vice versa, that is to say, it is not and can never be the prime function of defence expenditure to support United Kingdom industry regardless of cost. None the less, it remains our firm and often stated policy to buy British wherever it is sensible and practicable to do so, and to prefer a foreign product over that of our own industry only where the latter fails by a substantial margin of performance, time scale or cost. As a result over 90 per cent. of the defence equipment budget is spent directly with British industry or on collaborative projects.
The industries on and around the Tyne, taken together, represent a combination of skills which is of great importance to defence and to the equipment needs of the Services. There are well over 60 firms with factories in the metropolitan county of Tyne and Wear which are quality assessed as being eligible to receive direct Ministry of Defence contracts. There will also be many which perform sub-contract work on Ministry of Defence contracts, although these cannot easily be identified separately. These factories employ between them about 40, 000 people. In 1980–81, the last year for which figures are available, they received between them well over £100 million in direct defence contracts. Contracts placed during 1980–81 amounted to over £60 million.
I should like to single out for particular mention some of the major defence contractors on Tyne and Wear to which the hon. Gentleman referred. The hon. Gentleman has centred his remarks, understandably, on Swan Hunter. In response to one of his remarks, made in passing, I should like to say that there is no question, whatever 725 problems Swan Hunter may have—they are shared with the rest of the British shipbuilding industry—of Trident being responsible for turning off the tap for warship building. The assessments made by British Shipbuilders, in conjunction with the Ministry of Defence, about the likely capacity would have been made regardless of any decisions taken on the Trident project.
As the hon. Gentleman knows, the Swan Hunter yard is an important component part of British Shipbuilders. It has done distinguished work for the Royal Navy. At present some 9, 000 of the work force are working on Royal Navy contracts. Two ASW carriers and a Type 42 destroyer, HMS "York", are on order from the firm. The Ministry of Defence's outstanding contract liabilities with the company amounted to some £240 million at the end of the last completed financial year. In addition, Swan Hunter has been awarded the preliminary design contract for a new class of afloat support vessel.
In view of the contraction of the Royal Navy's surface ship programme, I cannot be optimistic about long-term prospects for Ministry of Defence orders with the firm continuing at their present historically high level. However, the current programme should provide the firm with work until the end of 1984, as the hon. Gentleman indicated. British Shipbuilders has stated its intention of using this period to obtain merchant shipbuilding work and progressively to devote more of its staff to such contracts as work for the Royal Navy nears completion. This, as the hon. Gentleman will appreciate, is necessary because Naval work requires a much higher proportion of outfitting and electrical trades than does merchant shipping. We welcome British Shipbuilders' constructive and farsighted attitude in adopting this strategy. The hon. Gentleman will probably not need to be reminded that Swan Hunter was, of course, predominantly a merchant shipping yard until 1977. I am sure that, given the time now available it will make a successful transition back to a predominance of merchant shipbuilding work which will redress the balance in favour of civil orders.
The needs of the yard are being closely considered by British Shipbuilders in its discussions with the Ministry of Defence and the Department of Industry. Both Government Departments and British Shipbuilders are closely monitoring the situation and are fully aware of the points that the hon. Gentleman has made. One cannot expect yards to change their sphere of expertise overnight.
One can see what the problems are likely to be over the next few years for Swan Hunter and what appropriate steps need to be taken. As hon. Members will be aware, Swan Hunter has won some important orders over the last year—the British Nuclear Fuels Limited irradiated nuclear fuel carrier worth around £13 million and the £14 million newsprint carrier for Thor Dahl. A further large order was announced last week for a sophisticated general cargo vessel able to carry a wide range of cargoes and containers. The order—for the Norwegian company Leif Hoegh—is worth around £25 million. Hon. Members will not need to be reminded that Swan Hunter is an excellent yard, with an excellent work force capable of pulling in the orders. We hope to be able to place an order for the afloat support vessels some time next year.
It would be remiss if I did not mention in a debate of this importance the place in the metropolitan area of Tyne and Wear of Vickers, although the hon. Gentleman made no great mention of that company. The tank factory at Elswick in Newcastle has a long and distinguished history 726 of work, particularly in overseas sales. We welcome the plans that Vickers has to move the tank plant from Elswick to Scotswood and modernise it where necessary, and the continued employment in heavy engineering which this will bring. The confidence that Vickers places in the future and in its work force is demonstrated by its willingness to devote over £6 million of its own funds to this re-location. I am glad also that the Government, in the form of my right hon. Friend the Secretary of State for Industry, have been able to provide financial assistance to the firm in making this move.
It has been the policy of successive Governments to look first to the Royal Ordnance Factories for heavy armoured fighting vehicles, and in lean times this means that tank production work must go to the Royal Ordnance Factory at Leeds. This is the most efficient procedure as far as defence votes are concerned, as it avoids the excessive overhead costs that would arise from maintaining two sources of supply.
Over recent years, therefore, Vickers has developed its own range of main battle tanks, with a specification designed to meet the particular needs of the overseas market. The company's technical and commercial record over these last 10 years has encouraged it to invest in a new factory in Newcastle which will provide the base from which to exploit the developing export market for military vehicles.
This new and modern factory concept will provide 380, 000 sq ft of space for production, and has been built at a total cost of £7.5 million. It will have a capacity for approximately 100 vehicles per year, together with resources and facilities to undertake the manufacture of a wide variety of general engineering products. Initially employment will be provided for 700 people. At the same time the company is, from its own resources, extending the range of vehicles to cover not only tanks and recovery vehicles, but bridge layers, self-propelled guns and personnel carriers.
The company has confirmed that it would not have gone ahead with this project, code named "Dreadnought", had it not been for the substantial regional development grants provided by the Department of Industry, and the direct benefit the on-going business will derive from the advantages of the enterprise zone, in which the factory is located.
I also understand that the transfer of the business into new premises is being used as an opportunity to rationalise the management and production systems with the intent of improving the company's competitiveness, and hence the prospect for further employment on Tyneside in due course. I know that the hon. Gentleman will welcome that.
Vickers has enjoyed export success in the past with various armoured vehicles, as well as modification and retrofit packages for vehicles in service with a number of armies around the world. The company is highly oriented towards overseas sales and, quite apart from the Valiant tank, is pursuing a wide range of prospects which, for commercial reasons, I cannot comment on in detail. We have given the company help in the past with its sales promotion efforts, and the MoD defence sales organisation is lending its support to Vickers' export drive.
I come back to one part of nautical work and discuss ship repairing. There is quite a bit of ship repair work done on the Tyne, some in British Shipbuilders and some in yards outside British Shipbuilders. It has always been the 727 policy to repair Naval and Naval auxiliary ships within the Royal dockyards to the maximum extent possible within the retained capacity of the dockyards.
Prior to the White Paper, Cmnd. 8288, the Royal dockyards were severely overloaded and had been for some time as the report of the dockyard study in 1980 made clear. This overload resulted, in practice, in a substantial volume of repair work, in the years leading up to Cmnd. 8288, being placed with industry. Some of this, of course, was carried out on the Tyne. Although the contract work included some Naval vessels, of which the assault ship HMS "Fearless" and the frigate HMS "Torquay" were examples of work carried out on the Tyne, Royal Fleet auxiliaries constituted the major element of work which was placed to contract so as to relieve the dockyards.
One of the major objectives of my right hon. Friend's review was to reduce the total requirement for refitting work both by eliminating major mid-life refits of surface warships and by reducing the number of naval surface ships and auxiliaries. The primary effect of this was on the dockyards themselves and, as the House is aware, three out of five Royal dockyards are due for closure by 1984. It also soon became clear, however, that there would be a substantial reduction in repair work for industry, and in December 1981 firms were informed that they could no longer expect a regular programme of work such as there had been in recent years.
Cmnd. 8288 did not lead, however, to a sudden termination of all RFA contract work. A substantial volume has continued throughout 1981–82, including work on the Tyne. Moreover, it is expected that there will be a continuing need, although at a reduced level, for which Tyneside yards will be given every opportunity to compete. I am pleased to announce that I have today agreed that the RFA "Fort Grange" should be refitted at Smith's ship repairers on the Tyne, the company having been successful in a competitive tender exercise. I am glad to have the opportunity of making that news known. We also acknowledge and readily testify to the good work which has been and is being done in commercial repair yards, such as Smith's.
I should need much more time to refer to some of the other companies in the region. The hon. Gentleman spoke about Marconi at Gateshead, and he said, rightly—and it was a comment in passing—that the Sea Wolf order had not affected the employment position there, which is correct. I remind him that the position at Gateshead may be affected by the air defence radar orders which we are considering at the moment, and we hope to make an announcement in the near future.
There is also the workloading at the Royal Ordnance Factory at Birtley, which is mainly concentrated on various forms of ammunition. That is also carefully monitored and considered by the Ministry of Defence. The estimated value of orders for 1982–83 is, for example, running in Birtley at about £44 million. There is quite a significant amount of work still going on in that factory.
The products that all these factories on Tyneside supply to the MoD are many and varied. They range from very important but unglamorous items such as brushes and mops, ships' steering gear and combat clothing to lead-based paints. It is important to make this point because it is very easy for any hon. Member—this is no criticism of 728 the hon. Member for Newcastle upon Tyne, East—and Ministers, too, to become hypnotised by some of the bigger, glamorous companies and to regard them as the key ones. Of course, they get the headlines and employ large numbers, but there are sizeable numbers of people employed in these much smaller companies working on the less glamorous aspects of MoD work. They are very important to us, and we have spent large sums of money with them.
§ Mr. Mike ThomasI appreciate what the Minister is saying. Earlier in his speech, he made the explicit point that orders which had been running at about £100 million a year in this general area are now down to about £60 million. Am I right in saying that his speech has confirmed that there has been a substantial cut—40 per cent.—in the amount being spent?
§ Mr. PattieI said earlier that £100 million was the figure in 1980–81 that had been spent, and that further new contracts of £60 million had been placed. That represents a reduction of the order indicated by the hon. Gentleman.
The term "cutback" is often bandied about in relation to current defence spending, and it is true that we have had to adjust our future programme to take account of the funds that we are likely to have available—as my right hon. Friend made clear in Cmnd. 8288—but I remind the House that we plan to continue to increase defence spending overall in real terms for the next four years in line with the NATO target of 3 per cent. That means that the equipment share of the budget will also continue to increase in real terms.
I cannot make predictions or promises as to how much of this increased budget will come the way of Tyneside. As my right hon. Friend made clear, the adjustments to the defence programme that were necessary will mean reduced job opportunities in some areas, particularly in the older, more labour-intensive industries. Thus, I cannot rule out the possibility of reduced defence work for some of our contractors on Tyneside. However, the opportunities that exist—and are increasing—for work in the newer, more technological, industrial sectors will be available for firms on Tyneside as elsewhere. Furthermore, my ministerial colleagues and I lose no opportunity of emphasising to prime contractors the importance of sub-contract work to smaller United Kingdom firms, and I am optimistic that opportunities will remain plentiful in this area as well.
§ Mr. ThomasI am grateful to the Minister for giving way again. I was deliberately brief in the hope that I would be permitted to intervene once or twice. Returning to the question of the effect of the defence review in the general thrust of the Government's posture on defence, he suggested earlier that in some way or other, if the Government were to embark on the Trident programme, that would not have a profound effect on the surface ship ordering that would go on in a yard such as Swan Hunter. It seems to me that Swan Hunter is peculiarly vulnerable to the kind of imbalance that the Trident project will create in the whole business of naval procurement. Can the Minister deny that the kinds of ships that are being built at Swan Hunter and that may be built there in the future, are unlikely to be built in anything like the present quantities if Trident goes ahead?
§ Mr. PattieIt is a little difficult to respond in the time that I have left to me. The review that my right hon. Friend
729 made in the summer of last year changed the emphasis of Naval provision for the future from the surface fleet, as the hon. Gentleman knows, to the sub-surface fleet. The whole problem about the Trident procurement is that that is a separate issue which is used as a red herring. If the hon. Gentleman were prepared to take issue with me on whether that was the right decision to take—not the Trident decision but the balance that came out in the White Paper—I could argue that point with him. I do not think that we have any more time in which to deal with that.
730 All in all, there are many exciting possibilities open to British industry to benefit from increased defence expenditure, and I very much hope that firms on Tyneside will be successful in 'winning their share of the opportunities that exist.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-one minutes to Two o'clock.