§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]
§ 10 pm
§ Mr. Derek Foster (Bishop Auckland)I am very glad to be able to use this Adjournment debate to talk about the closure of the Shildon engineering works in county Durham. What we are discussing now is the devastation of a very important town of over 14,000 people in county Durham. This destruction of a town comes hard or the heels of the destruction of Consett, not 20 miles away. I want the Minister to take note that we have lost more jobs in the Northern region in the last three years, since his Government came to power, than were attracted by 10 or even 15 years of positive regional development policy, on which there was a consensus on both sides. That is a shameful matter for his party, to which he really ought to have some response.
Only a short time ago British Rail Engineering announced that it was to close the works in Shildon. It is a profitable works. This works has been described as the most efficient wagon works in the whole of Europe—not by me, not by the workers at the plant, but by the managing director of BREL. Not more than 14 months ago it was described as the jewel in the crown of British Rail Engineering, and now British Rail is saying that it is obsolete. What has happened in the meantime to make British Rail Engineering describe this works—which has been so efficient, so profitable, so valuable to it—as obsolete?
Industrial relations have been absolutely exemplary at this plant. The men have done everything that was required of them and very much more. Indeed, British Rail Engineering has invited leading shop stewards at Shildon to go to all its other plants and show other shop stewards the benefits of flexible working and cost-cutting exercises in making their plants competitive. What do these people get for doing everything that the Prime Minister and the Government say that our work forces should be doing in this country? They get a swift and hefty kick in the teeth. All their co-operation is thrown back in their face. Is it surprising that these men may draw very bitter lessons from this experience?
The commitment to rail in the town of Shildon is absolutely unparalleled. Indeed, one of the first rail engines, which was called the Sanspareil, the great rival of the Rocket in the Rainhill trials, was built there. The Rocket ran from Shildon on its first trip. Timothy Hackworth, who was a great rival of George Stephenson, built the first works in Shildon 150 years ago, and this works is a direct successor. We are talking about the destruction of the very birthplace of the railway. Railways have spread throughout the world and we have taken great pride in our engineering success. This is where they were born. Is this where the death of rail will start, under the jurisdiction of the Government?
The Minister should consider the social consequences of the decision. He cannot tell me that it is a matter for British Rail and nothing to do with the Government. Will they stand idly by, as they did when Consett was destroyed, and see 2,500 workers and their families condemned to poverty? They will not get other jobs in the 371 North-East, and long-term unemployment is increasing by the day. If the works close, those workers will join the long-term unemployed.
In the Bishop Auckland employment exchange area the rate of unemployment is 17½ per cent. The closure would push it above 30 per cent. The rate in Shildon is calculated to reach 60 per cent. In Jarrow in the 1930s it was 86 per cent. Even teachers could not get a job. It is a great tragedy that in the 1980s we can talk of rates of 60 per cent.
The local authority will lose about £700,000 in rates. The authorities are already struggling to do the best for their areas. Housing developments have been negotiated with private developers. The Labour-controlled council has been progressive enough to go to the private sector for development. Those developments are under threat because of the closure.
Then there are knock-on effects. Businesses that supply, or are supplied, by the engineering works, will be seriously affected. The cost to the pubs, clubs, leisure facilities and other traders in the small town is incalculable. The south-west Durham training association does a great deal of training throughout the area for small engineering companies. Its biggest client is British Rail Engineering. I shall be surprised if it survives if the works closes. That is another big problem for the Secretary of State for Employment. More public expenditure will be needed to pull that out of the fire.
On the Treasury's figures it costs £5,000 per annum to keep an unemployed person and his family. Having about 2,500 people long-term unemployed will cost £12½ million a year. The other redundancies contemplated in Harwich and Swindon will increase the figure to £25 million a year. That is without the cost to the company of redundancy money.
British Rail Engineering is attempting to save only £18 million on overheads by the rationalisation. The taxpayers, whom the Government pretend to protect, will be at least £7 million worse off each year. We must add the compensation to local authorities for loss of rateable income. The precedent was set in Consett. In addition, there are the industrial development costs of attracting 2,500 jobs. The cost of winning each job to an area like the North-East will be about £10,000 and it will take between seven and 10 years to get the skilled male jobs back into the area.
All of those public sector costs must be borne by the rest of us. British Rail gives its reasons for the closure as, first, the recession. Who can quibble with that? Secondly, it blames the tight financial limits that have been imposed by the Government. Thirdly, it cites its failure to win exports. In that connection, it also blames the over-valued pound. I pin those three factors upon the Tory Government's policy.
British Rail gives another reason—greater efficiency. I accept the argument that British Rail has used its stock much more efficiently. It has higher capacity trucks, higher speed trains that allow a quicker turn-round and greater efficiency of handling, and the TOPS computer programming that enables it to know exactly where all the rolling stock is. We welcome that greater efficiency and the increased utilisation of existing stock, but British Rail says that it must rationalise and integrate the works to achieve greater flexibility.
372 The people of Shildon suspect that the Government are trying to create a slimmer, fitter BREL that they hope will become profitable so that it can be sold off to their friends in the City. The people of Shildon suspect that that is the case not merely for their own works, but for all BREL works.
Why has British Rail decided to buy no wagons in 1983? Is that commercially prudent? Even though its fleet has diminished and will continue to diminish, surely British Rail will need to purchase wagons soon. It cannot go on year after year without replacing stock. It says that the reduction in the wagon fleet is not related to the reduction in freight. Indeed, freight traffic increased last year as a result of the greater efficiency that I have mentioned. British Rail says that about the same quantity of freight will be transported in 1986 by about one-quarter of the number of wagons that were being operated in 1980. There were 130,000 wagons in 1980 and there will be 34,000 in 1986. That means that each wagon must bear four times as much wear and tear. Indeed, wear and tear will be greater because of higher speeds and greater braking and the consequent greater load transference. If the wagons have been designed with the greater intensity of use in mind, it has been a secret to us. If that is the case, how long ago were those developments foreseen and why were they not planned? Why was it possible for the deputy chairman of the board and the managing director of BREL in their headquarters in Euston to tell me not 14 months ago that no conceivable restructuring of BREL could possibly undermine the long-term future of Shildon? We were told that if the closure of Ashford were allowed to go ahead, the long-term future of Shildon was guaranteed. That was only 14 months ago. The Under-Secretary's predecessor in Marsham Street also told me that.
May I press the Minister on the important trend of British Rail advising its clients to purchase their own trucks or to lease them? We suspect that most of those privately purchased or leased trucks are being bought from the private sector, not BREL. I have a paper from Mr. Sanderson, the director of freight, who tells me that there are 16,000 such wagons. How many of them have been bought from private manufacturers? Those 16,000 wagons represent 16 years' work for the people of Shildon. How many have been bought from the private sector? Does the fleet of 34,000 in 1986 include those 16,000? If not, will the 16,000 also be severely slimmed down by greater efficiency?
What is happening to the redundant wagons? Could they not be refurbished and sold abroad? If it is so hard for us to compete with South Korea and other newly industrialising countries, why cannot we refurbish those wagons and outbid them in that way? That is exactly the kind of work that could be done at Shildon.
I also want to know, as do the people at the other works, whether, if this kind of development proceeds, there will be further redundancies in a few years' time—for instance, at the works in the constituency of my right hon. Friend the Member for Doncaster (Mr. Walker). The unions are already seriously suggesting that from 1986 there may be as few as four works left. Will the Minister comment on that?
If BREL cannot now compete in its export markets, how long will it be before, due to financial constraints, BR begins to purchase from South Korea? Have any BR clients already bought abroad? If increasing emphasis is placed on purchase in the private sector, how long will it 373 be before they begin to do so? Have any of the private manufacturers sold abroad in competition with BREL? We do not have those facts. Are private manufacturers thought to be more competitive than BREL? If it is said that they are, why was I told by the managing director that Shildon is the most efficient wagon works in Europe?
As the Minister knows, less freight is carried by rail in the United Kingdom than in any other European country, for the simple reason that we subsidise our railways much less than any other European country, despite the strong environmental arguments for carrying far more freight by rail. There is less damage to roads and buidings, less pollution, noise and fumes. It is far safer than road carriage from the point of view of accidents—and the cost of accidents must also be borne in mind. There is also the fuel economy argument. It would be far cheaper to carry freight by rail, especially if the electrification work were allowed to go ahead.
There is a tremendous need for investment in rail. In the summary of accounts, Sir Peter Parker said that £500 million per year was needed to take care of essential renewals, which includes wagon renewals, but only £308 million was spent last year—far less than the amount necessary.
There are many other arguments that I should like to advance, but I see that my time is rapidly running out. I believe that the Tories wish to pursue these policies because they despise the nationalised industries. They do not wish to see tham prosper unless they can sell them off. Then they wish to browbeat the unions into accepting far greater increases in productivity than are humanly possible within the time span.
There is, then, the barren and now utterly discredited argument that public expenditure crowds out private investment. That is the kind of argument that allowed the Prime Minister's personal economist to intervene and prevent the electrification scheme from going ahead in the way that it should have done.
I see that the Minister is straining at the leash to answer all of the questions that I have put. I look forward to some very straight answers.
§ The Under-Secretary of State for Transport (Mr. Reginald Eyre)I wish to say first that I appreciate the seriousness with which the hon. Member for Bishop Auckland (Mr. Foster) has described the problems created by the British Rail proposal to close its Shildon works. This is, indeed, a serious matter. I shall do my best, in the limited time available to me, to reply to the points that the hon. Gentleman has raised. I understand fully the importance of the proposals especially to the people of Shildon and to the people of Horwich and Swindon who also are affected by the British Rail Board's closure proposals.
The hon. Gentleman has concentrated understandably on the effects that the closure will have on the local community. He has drawn attention to the particular circumstances of Shildon as a town. I shall return to these worrying aspects. The hon. Gentleman also touched upon the efficiency of Shildon as a workshop and the impressive performance of the work people. I should like to be associated with those remarks which are generally accepted as true and justified.
What therefore are the reasons that the British Rail Board gives for these proposals? To understand them, it 374 is necessary for me to describe the situation at British Rail Engineering Ltd. and the rail freight business. British Rail Engineering Limited, or BREL, is a wholly owned subsidiary of the British Railways Board. It manufactures British Rail's rolling stock and carries out all its heavy maintenance. It also carries out some work for outside customers.
BREL is a big organisation. It has 12 operative workshops throughout the country employing some 35,000 men. The company's turnover in 1981 totalled £441 million of which about £25 million represented work for outside mainly export customers. Those were exports in a very competitive world. But the main reason for BREL's existence is to meet British Rail's legitimate needs for new rolling stock and maintenance services. Its work must be related to demand from British Rail and BREL's outside customers combined. Over a period of years a situation has developed whereby BREL has considerable excess capacity. In relation to freight wagons, demand has fallen rapidly. As the main workshop engaged in the building and repair of freight wagons, Shildon is regrettably, but naturally, worst affected.
There are a number of reasons why the railways are now obliged to reduce their requirements for wagons. For several years, the British Railways Board has been pursuing a strategy intended to bring the freight business up to date. This is against the background that it has been required, quite properly, by successive Governments of either party, to operate the rail freight business on a commercial basis without public subsidy. In practical terms this has meant that the board has moved out of the old style, low quality, high cost traffic in favour of the movement of bulk, long distance traffic for which rail can provide a more efficient and economical mode.
This total change in the size and use of the wagon fleet has been dramatic and continuous. In 1976, the railways carried 176 million tonnes and in 1981 carryings had reduced to 154 million tonnes. But, at the same time, the number of wagons owned by British Rail was reduced from 180,000 in 1976 to 88,000 in 1981. Future building plans are, of course, related to future fleet size. The continuing reduction in wagon numbers reflects the scrapping of old fashioned wagons which have come to the end of their life. I fear therefore that they are not available for successful sale as the hon. Gentleman suggested. Also, they are subject to modern adjustments in technical and operating conditions. Nevertheless, some new building for replacement has been needed.
Following a reappraisal of freight business plans, the board has necessarily revised downwards its future requirements as originally foreseen. Indeed, I have to emphasise that because of the continuing pace of technical change the board's latest forecast is that its total fleet requirement will, by 1986, be only about 34,000 wagons while still carrying the same or even higher levels of traffic as today.
There are three main reasons why this change has been brought about so suddenly. First, modern wagons have been developed in such a way as to have greater carrying capacities and higher operating speeds than their predecessors. So wagon productivity has increased. Secondly, the development of the total operations processing system means that it is now possible for British Rail to increase the utilisation of individual wagons much more efficiently. These are therefore the consequences of investment in new technology. British Rail invests and 375 continues to invest in new technology to achieve those very purposes of increased efficiency in the total interest of the railway business.
The third reason relates to future forecast carryings. These forecasts have unfortunately had to be revised downwards in recent time.
In 1979, the board carried 169 million tonnes of freight. In 1980, however, carryings were down by 10 per cent. to 153 million tonnes as a result of the steel strike. Despite some improvements in particular areas, including steel, carryings in 1981 stayed about the same at 154 million tonnes.
The amount of freight carried by rail is inevitably affected by changes in the industrial structure generally in a world trade recession—I emphasise in world trade recession—and also by technical changes in industries that are predominant movers of bulk traffic. Present forecasts by BR now suggest that it will take until the end of the decade before rail freight can return to the position that it was in in 1979.
The implications for BREL as a whole are clear. Shildon has the capacity to build wagons at the rate of 1,200 to 1,500 a year. This year it has orders from British Rail for 780 wagons. Next year, British Rail requires no new wagons. BREL's wagon repairs, which totalled about 64,000 in 1976, were down to about 15,000 in 1981.
These are big adjustments with serious implications. British Rail recognises that the consequences of its proposals are serious, and the decisions involved have not been taken lightly by the board. Indeed, I have been in touch with the British Rail Board and I understand it would be more than willing to arrange for Members of Parliament concerned a presentation of the technical details involved in the decision.
It has been argued that an alternative approach would be to slim down all 12 of the British Rail workshops rather than close down any one. There are, of course, aspects of this approach that seem attractive, and it has been seriously considered by the Board. However, I am informed by British Rail that in practice the effect of such a proposal would be to endanger the economic justification for the continued existence of all 12 workshops, and it can be seen at once that the ultimate implications of this would be extremely serious.
Therefore, the board was compelled to recognise that there was no solution to be found in the idea of equal sacrifice all round. Nor is it realistic, I am informed, to think in terms of converting Shildon or Horwich to other types of railway work. There is simply not enough to go round.
The hon. Member referred to the use of private wagons on the network. I must say that British Rail is absolutely right to encourage as far as possible the private ownership of wagons, so that its customers are committed to the use of the railway.
An argument which has been raised, and which I can quickly show to be without foundation, is that the problem is caused by the Government not allowing the railways sufficient support. I have to emphasise that direct support from central and local government to British Rail is at its highest level ever.
376 The board has not, I emphasise, held back investment in the freight business. It is, indeed, investment in new technology that has brought about the change in the type and number of wagons needed by British Rail, and it is this increased efficiency which means that the continued supply of older, unwanted wagons cannot be maintained.
I can well understand the feelings of all those involved in the closure of Shildon and the reductions at Horwich and Swindon, and I sympathise with them, but I have to stress that these are British Rail proposals about which it is consulting the unions. There are wider, serious implications, as the hon. Gentleman said, and I now turn to these.
First, the hon. Gentleman has mentioned the effects of the closure on the levels of unemployment in the area. He mentioned some high rates, to which I must come later.
The Government are as concerned as anyone about levels of unemployment throughout the country, and especially about closures, such as that at Shildon, but we must compare levels of unemployment in different areas on a fair and consistent basis. The smallest of such areas for this purpose are the Department of Employment travel-to-work areas made up of one or more employment office areas.
The Shildon works lie in the Bishop Auckland employment office area, which is part of the Darlington and south-west Durham travel-to-work area. It is the effect on unemployment in that area that must be considered. The latest available figures for Darlington and south-west Durham indicate that 11,500 people are without work—a rate of 13.9 per cent. Thus, as the House can see, if the addition of 2,500 people to this list over the two-year period involved in closure took place, although much to be regretted, it would not increase those figures to the rates that the hon. Gentleman suggested. They would be about 16½ per cent.
Although it is important to put the effects of the closure in perspective, the Government are very conscious of the effects that the closure may have on the people of Shildon and its immediate vicinity. Our concern is clearly demonstrated by the presence in the House tonight of my hon. Friend the Under-Secretary of State for Industry whose responsibilities include regional industrial policy. I am sure that he will keep the situation in Shildon, and the travel-to-work area of which it is a part, very much in mind as the situation develops.
I should like to make it clear at this stage that, under current plans, Shildon is to remain an assisted area when many areas are due to lose their assisted area status. As an intermediatre area it will continue to benefit from regional aid through regional investment incentives, with which the House will be familiar.
Since the Government took office, £20 million has been committed for projects in the Darlington and south-west Durham travel-to-work area——
§ The Question having been proposed at Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at half-past Ten o' clock.