HC Deb 17 April 1985 vol 77 cc263-72 3.31 pm
The Secretary of State for Defence (Mr. Michael Heseltine)

With permission, Mr. Deputy Speaker, I should like to make a statement on the future arrangements for the royal dockyards at Devonport and Rosyth.

The royal dockyards employ some 20,000 people. Their turnover is £400 million a year. They repair all of our nuclear-powered submarines, including the Polaris force, and nearly 80 per cent. of our conventional warship fleet.

As the House is aware, there has over the years been a succession of studies and reports on the future of the dockyards. Those reports generally agreed that change was essential, but all previous attempts to introduce a changed structure have come to nothing.

The Government believe that it is essential to get full value for money from the defence budget. If we are to achieve that in the dockyards, three main conditions need to be met. First, local managers must have the freedom and authority to manage in a more competitive environment. Second, the dockyards, as suppliers of services to the fleet, must be separated clearly from their customer. Third, their financial and accounting arrangements must reflect normal commercial practice, so that the true price of the work can be properly judged.

I am today issuing an open government document, copies of which I have placed in the Library, and a consultative document to explain to those who work in the dockyards the likely consequences of change. I am not today announcing a decision on the way forward, but I am opening a period of consultation. I hope that there will be a wide, constructive and fruitful discussion over the next two or three months. My intention is to announce to the House a clear way forward before the summer recess.

The main options for change range from the creation of a trading fund to full-scale privatisation. Although it would be possible to achieve some improvements within the strategy of a trading fund within the public sector, that would not give the enterprise sufficient freedom from Civil Service constraints for it to operate efficiently in a competitive environment. The options which would provide that freedom are full privatisation or a system of commercial management under which each dockyard, while remaining in Government ownership, would be operated for a period of years by a company chosen by the Government following an open competitive process. Under either of those options the Government would insist that control remained in British hands.

It is the option of commercial management that seems to the Government to be the best way forward, since it secures continuing competition while maintaining control over the national strategic assets involved. It would require legislation. That option, like full privatisation, also offers the prospect of outside work for the dockyards from customers other than the Ministry of Defence. If implemented, we could therefore look forward to a tauter, more flourishing enterprise.

The House will recall the many successful transfers to the private sector from the public sector achieved by the Government. In all those cases the rights of employees have been protected. Similar protection would form part of a move to the private sector should the Government choose that option.

Whatever the new framework for the longer term, there is an inescapable need for adjustments to the work force in the short term in order to improve dockyard efficiency. Management will be discussing the way forward with the unions involved, starting today. The package of efficiency measures it will be looking for may involve job reductions at Devonport of about 15 per cent. and at Rosyth of about 5 per cent. Natural wastage and voluntary retirement can be expected to achieve most of the reductions sought by management, particularly at Rosyth. Compulsory redundancy will be used only in the last resort.

My Department, as would any good employer, will do all that it can to alleviate the effects of the new efficiency measures; particularly it will consider how new business and employment opportunities in these areas might be fostered, including work in support of the new dockyard organisation. I intend to ask my hon. Friend, the Under-Secretary of State for Defence Procurement, to take a particular interest in co-ordinating the efforts required in this positive approach.

These two dockyards have served the Royal Navy and the nation loyally for many generations. I wish to stress that under this Government their long-term future is assured. But in giving this assurance, and recognising the significance of the yards to their local economies, I must also expect them to be run to proper levels of efficiency. I believe that the House will accept that there is a broad agreement that change in the management of the dockyards is needed now.

I hope that all concerned will join constructively in the consultation process to assist the Government in the decisions that need to be taken. Once the difficult but short period of adjustment has been completed there will be considerable opportunities for expansion and enterprise.

I will do all I can to bring about these new opportunities

Mr. Denzil Davies (Llanelli)

In effect, the Secretary of State's proposal will privatise the work of the royal dockyards, because the consultation exercise is completely cosmetic and a farce. This is another piece of the ideological nonsense that we get from a Government who are more concerned with their own prejudices and dogmas than with objective analyses and rational judgment. We believe that the privatisation proposal, for that is what it is, will be bad for the Royal Navy, for its ships and for those who sail in them. The proposal will be bad for those loyal workers who have worked in the dockyards; 2,000 or more will lose their jobs from today onwards, even before privatisation. At the end of the day the proposal will also be bad for the taxpayer, who will pay more for running the dockyards.

Is the Secretary of State aware that the most hairbrained proposal of all is that contained in the report by Mr. Peter Levene? That is the proposal that the Secretary of State favours and that will be carried out — consultation or otherwise. Under that scheme the dockyards will be franchised for a period of four, five, six or seven years. The system of franchising may be suitable for a fast food burger bar, but it is totally unsuitable for the refitting and repair of the frigates and submarines of the Royal Navy.

The Secretary of State has mentioned the number of reports that have been published in the past on the dockyards. Is he aware that Sir John Mallabar's report, which contrasts sharply in expertise and substance with the flimsy six-page, amateurish report that he got from Mr. Peter Levene, came to the conclusion that the franchise option is the way to get the worst of all worlds"? Has the Secretary of State not taken any notice of the Mallabar report, the Speed report and other reports that have condemned the system he wants to operate?

Can the Secretary of State confirm that under the franchise arrangement there will have to be a cost-plus contract so that, because of the extra money that will have to be paid to private contractors for doing work which was not programmed and for doing operational repairs, it will cost more at the end of the day to operate the royal dockyards than it is costing at the moment?

These privatisation proposals will make things worse rather than better. They are not worth the upheaval that will be involved. That is why we shall oppose them by all legitimate means both inside and outside the House.

Mr. Deputy Speaker (Mr. Harold Walker)

Miss Janet Fookes. Sorry, Mr. Heseltine.

Mr. Heseltine

I share your view, Mr. Deputy Speaker, that a reply is hardly needed, but perhaps I may trespass on the time of the House for a moment.

The response of the right hon. Gentleman is understandable, particularly because he patently has not understood the nature of the proposals that I am putting forward. If I answer his third question first, the difficulty he is in will be clear to all because the answer is, no, the contract will not be a cost-plus contract. It will be as a result of competitive tendering for the bulk of the work that will be carried out by whoever manages the operation. The fact is that there are international precedents for large organisations involved in defence being managed under this system—[HON. MEMBERS: "Where?"] In the United States of America. [HON. MEMBERS: "Tell us the details."] Oh, certainly. Let me give the House some details if it would help. In the United States of America, the naval industrial reserve ordnance plant in California is operated for the United States navy by General Dynamics, and about 8,000 people are employed. The Louisa army tank centre at Louisa, Ohio is operated for the United States army by General Dynamics, and about 3,000 people are involved. Therefore, I give the House just two examples. The proposal is based upon American experience. I see no reason why we should not gain from it here. I think that the House will realise that the right hon. Gentleman does not have the first idea of how this scheme works out. We are in the process of consulting to see which is the preferred solution. That is the purpose of today's initiative.

I come back to the right hon. Gentleman's first charge, that we were motivated by prejudice and dogma. I think that the House will want to judge the validity of such an assumption when it is the policy of the right hon. Gentleman, upon being elected to this job, if ever he got it, to remove some 2,000 to 3,000 jobs in Rosyth as part of the process of getting rid of Britain's independent nuclear deterrent. If that is not an example of prejudice and bigotry, I do not know what is.

Miss Janet Fookes (Plymouth, Drake)

While I warmly welcome my right hon. Friend's confirmation that there is a long-term future for the dockyard I can only view with dismay the short-term decision, which will involve the shedding of jobs. Will my right hon. Friend spell out clearly, and not with general Government waffle, precisely what is involved and what steps will be taken to alleviate the situation for those who find their job prospects reduced?

Mr. Heseltine

I am grateful to my hon. Friend who, I know, will take a considerable interest in the position of her constituents and ensure that the Government do all that they properly can to help with the short-term problems that we shall have to face in that area. Today the unions are having their first meeting with the local management, because it is absolutely critical that the negotiations should proceed at local level between unions and management. The broad outline of the efficiency gains that the management believes to be possible will be put to the unions, and a consultative process will take place. Over the course of perhaps two years we see the opportunities for efficiency gains, which could reduce the present job levels in the Devonport dockyard by some 15 per cent., but one's experience of such a process — [HON. MEMBERS: "How many?"] That would be something in the order of about 2,000. From experience of the momentum that has to be achieved in gaining that efficiency, I hope that a relatively small proportion of that number v. ill be brought about as a result of compulsory redundancy. Our own experience would tell us that natural wastage and voluntary retirement will probably account for a significant majority of the efficiency gains that we have to achieve.

Dr. David Owen (Plymouth, Devonport)

Is the Secretary of State aware that after all the fine tributes to the dockyards during the Falklands campaign, the sense of betrayal as a result of the proposals will be very deep indeed? Will the right hon. Gentleman show to the House that he will take the consultative procedure seriously by at least agreeing to extend it to six months? Two to three months to give a city such as Plymouth the opportunity to put forward alternative proposals is totally inadequate, particularly because the agency proposal and the franchising, which seems to be the Government's most favoured option, is one that many people believe to be complete nonsense, and will not give job security. With regard to the 2,000 people in Devonport who will lose their jobs in the short term, what does the right hon. Gentleman mean by the short term? Is it 12 or 18 months? They must be told exactly what the period is. How are the losses to be spread over the two years? How is the redundancy to be spread over this two-year period? Will it happen immediately or steadily? Can the Secretary of State assure us that the consultation procedure will be lengthened?

Mr. Heseltine

I am sorry that the right hon. Gentleman did not hear what I said. I made it quite clear that we are talking about a two-year period. That is naturally the case if one is referring to natural wastage playing a significant part in the adjustments that have to be made. I cannot give the right hon. Gentleman the assurance that he wants about lengthening the consultation period. He knows that I have had lengthy discussions with the unions in both Devonport and Rosyth. The original idea was leaked out of my Department about a year ago and has been the subject of widespread discussions ever since. As the right hon. Member for Llanelli (Mr. Davies) said, so was the Levene report. Therefore, the idea that I am saying something today that has not been considered already is carrying language to an extremity. People's attitudes have been very clearly prepared for my announcement. Of course the consultation period will be taken seriously. We have already begun the discussions, which I believe to be important, but there is no point in spinning it out and avoiding difficult decisions in the way that, in the context of the dockyards, we have done for far too long. We have genuinely paid a great tribute to the dockyards for the way in which they respond classically whenever a crisis faces this country, but in paying that tribute we did not mean to single them out from the very large numbers of people in the private sector who respond in exactly the same way. While one admires and places great reliance upon the dockyards, one cannot escape the harsh reality that absenteeism in the dockyards accounts, on average, for every person employed there, for four working weeks a year. That is about 40 per cent. above the national average.

Mr. Dennis Skinner (Bolsover)

We get 16 weeks here.

Mr. Keith Speed (Ashford)

Would my right hon. Friend agree that the first priority must be the standard of service to the Royal Navy, as Operation Corporate proved? Secondly, will my right hon. Friend agree that, as applied to a large industrial organisation, the Civil Service rules are the real enemy and that there are other ways of overcoming this problem, apart from franchising, as I believe my report showed? May I say, in parenthesis, that I am not sure that the present relationship between the Pentagon and General Dynamics is the most happy one.

Mr. Heseltine

My hon. Friend knows a great deal about this matter and has considered it very carefully. I have looked at my hon. Friend's report and have considered the matter again. We are considering the options on a wider basis. My hon. Friend has put his finger right on the heart of the matter. Within the constraints of the public sector great inhibitions are placed upon the individual and free management that we believe a proper enterprise demands. The trading fund goes only half-way towards the much more open and free environment of a proper commercial operation. We accept that a trading fund could result in certain benefits but it would achieve nothing like all the benefits that we should like to consider as options.

Mr. Dick Douglas (Dunfermline)

Does not the right hon. Gentleman concede that he has today announced over 3,000 redundancies? Having given the numbers employed in the yards, and their turnover, will he say what value the Government place on these vital public assets? The Secretary of State referred to the experience in the United States, but does he not concede that Secretary of the Navy Lehman is presiding over a 700 ship fleet, whereas the Secretary of State and his other Ministers are presiding over the demise of the British surface fleet? Because of Trident he is concentrating on a programme that completely undermines our defence budget and defence potential. Will not the Secretary of State concede that this is the result of the misguided, stupid defence posture of Her Majesty's Government?

Mr. Heseltine

I am sure that the hon. Member will want to go and tell them that in Scotland to justify the threat of the loss of 2,000 to 3,000 jobs in Rosyth if the Labour party ever come to power again in this country.

Mr. Douglas

We will go to Rosyth together, then.

Mr. Heseltine

The hon. Member will make his case and I shall make mine. The decision will have to be made with full consultation. I have been to Rosyth to discuss these matters. My right hon. Friend the Minister of State for Defence Procurement is in Rosyth today and my hon. Friend the Parliamentary Under-Secretary of State for Defence Procurement is in Plymouth today to try to deal with the initial questions, which rightly concern those areas. We shall keep very closely in touch, but the people of Rosyth must clearly understand that I am offering to them a long-term, secure future. The Opposition are offering a devastating blow by the destruction of the major job opportunities in the area.

Sir Antony Buck (Colchester, North)

Will my right hon. Friend confirm that probably the most important issue is to ensure that the Royal Navy remains the best-equipped in the world for its size? Is he satisfied that his proposals will achieve that? Does he agree that fairness to the taxpayer is also appropriate and that many of us are not convinced that the organisation of the dockyards in the past has provided that?

Mr. Heseltine

I am grateful to my hon. and learned Friend. The document is supported by the Admiralty Board, which is as concerned as we are to achieve change because it realises that the defence budget ultimately bears the excess cost of managing the dockyards under the present regime and it wishes to achieve the best possible value for money. I believe that I can therefore give an assurance that the Royal Navy will be supportive, and has been supportive so far, of the Government's preferred solution in the open government document.

Mr. Gordon Brown (Dunfermline, East)

Can 8,000 loyal and dedicated workers at Rosyth be expected to entrust their future, the future of their dockyard and responsibility for the nation's defences, including our independent deterrent, to privatisation proposals which are dogmatic, unworkable and seek to subordinate the interests of national security to those of commercial gain? Are not these the disreputable plans of a discredited adviser who spent much of the year before this announcement hawking the royal dockyards around his friends in the private sector? Will the Secretary of State confirm that the United States dockyards are in the public sector and tell us how many jobs in the public service will be lost at Rosyth while he is providing for his private friends in the City?

Mr. Heseltine

I deeply deplore the scurrilous language used about Peter Levene, who has joined the Department as Chief of Defence Procurement. An extraordinary thing about this country is that although everyone knows that there is an urgent need to bring more industrial expertise into the management of public affairs the moment we do so the entire Labour party tries to diminish the endeavour. It is my responsibility to achieve value for money from the defence budget and I believe that Mr. Levene will play a major role in ensuring that. It is nothing short of hypocrisy for Labour Members to talk about job losses when they intend to cancel between 2,000 and 3,000 jobs at Rosyth if they ever return to Government.

Mr. Robert Hicks (Cornwall, South-East)

Is my right hon. Friend aware that the loss of 2,000 real jobs in the Plymouth and East Cornwall area is extremely distressing? Will he confirm that under any arrangements to introduce private management the existing work force will retain the present conditions of service? Secondly, will my right hon. Friend elaborate on the procedures that will apply to allow local firms to acquire increased dockyard procurement in the future?

Mr. Heseltine

I am most grateful to my hon. Friend. I know that he will wish to take a deep and continuing interest in our efforts in that area. I think that I can help him on both questions. First, there is now wide experience of the successful transfer of employees from the public to the private sector. Where this has occurred, the Government have broadly ensured that the conditions of service have been maintained. It is our intention to ensure that that is the case if we proceed in the way that the preferred solution suggests. As for our interest in creating opportunities for further employment, I have already been in touch with the leaders of the two largest authorities in the area—Devon and Cornwall county councils—and asked them to join my hon. Friend the Parliamentary Under-Secretary of State in a concerted effort to use whatever powers we have at the Ministry of Defence to counter the initial job reductions that the efficiency gains demand.

Mr. Ron Brown (Edinburgh, Leith)

There is a smell of horse dung about this statement. The Secretary of State is the greatest supporter of cowboys and similar forms of enterprise and he wants to apply the idea to the dockyards. The Secretary of State is also a great supporter of the ballot idea. Would it not be better and more democratic to put the matter to the vote and ask those involved in the dockyards to register their view of the Secretary of State's proposals? That is the democratic process for which the Government argued during the miners' strike. Why not put it to the test and see what the result is?

Mr. Heseltine

The whole House will be fascinated to see a sudden conversion to genuine democracy in the ranks of the unions. I assure the hon. Gentleman that any Government proposals will certainly be put to the vote. They will be put to the vote in this House, where democracy is of central importance.

Mr. Peter Griffiths (Portsmouth, North)

Will my right hon. Friend assure me that he has no proposals to extend his suggestions beyond the royal dockyards to include the fleet maintenance base at Portsmouth, which has already made quite sufficient sacrifices in the cause of further economies?

Mr. Heseltine

I fully understand my hon. Friend's concern. I realise the importance of the fleet maintenance bases. They are not included in my proposals.

Mr. Ken Eastham (Manchester, Blackley)

Are not the 20,000 workers to whom the Secretary of State referred loyal workers, many of whom have dedicated their whole working lives to these industries? The right hon. Gentleman spoke of two or three months for consultations. Is not that too short a time? Several trade unions are involved and people's livelihoods are at stake. Can the right hon. Gentleman assure us that, under the new regime, after privatisation, the protection rights and working conditions of the workers will be as good as those that they expect to enjoy today?

Mr. Heseltine

As I have said, whenever we have transferred employees from the public to the private sector we have done so on broadly comparable terms of employment. We would adopt the same approach in the context of any change in the royal dockyards. As I told the right hon. Member for Plymouth, Devonport (Dr. Owen), I do not accept that there is a need to lengthen the consultation period. The matter has been the subject of intense debate in the dockyards for many months.

Mr. Nicholas Fairbairn (Perth and Kinross)

May I congratulate my right hon. Friend on his courage in tackling a problem of inefficiency and outrage that has been connived at by Governments of all parties for many years, whereby a skilled work force has been held under by Civil Service constraints and union stubbornness? The work force at Rosyth will now have a great opportunity to exercise its skill and efficiency and to obtain other work which, unhappily, is at present going abroad?

Mr. Heseltine

I am the first to agree that large numbers of people in the dockyards have shown great loyalty and devotion in the defence endeavour, but the same spirit has been shown by equivalent people in the private sector. I cannot ignore the fact that there are significant inefficiencies and overmanning in the dockyards, and I cannot accept that that should be a permanent charge to the defence budget. I believe that if the dockyards can adopt a commercial approach there are job opportunities there that will be of significant benefit to the local economies. I and my ministerial colleagues are determined to make every effort to adopt a positive attitude, as a good employer should, to the benefit of the local communities.

Mr. Skinner

Does not the Secretary of State have a downright cheek when he talks to my right hon. Friend the Member for Llanelli (Mr. Davies) about lack of patriotism? When the right hon. Gentleman was in the Army, he could not get his Army jacket off fast enough. He bought himself out.

Mr. Deputy Speaker


Mr. Skinner

Yes, Mr. Deputy Speaker, I am coming to that. Will the right hon. Gentleman give a guarantee to the millions of people who will want to hear an unequivocal statement from him today that when the proposals are implemented and the selling off takes place, no foreign influence or money will be involved in it? Many people would like to know the answer to that.

Mr. Heseltine

But the hon. Member will realise that anyone who listened to what I said heard me make it clear that it will remain in British control.

Mr. Skinner

Ah, but that is not the same.

Mr. Bill Walker (Tayside, North)

My right hon. Friend will be aware that there are many people in the Rosyth dockyard who have been deeply anxious for a long time about the risk to their jobs of policies that envisage the dismantling of our independent nuclear force. The welcome that has been given to my right hon. Friend's proposals will be qualified because they are worried about change, but people are always worried about change. Will my right hon. Friend assure those workers that the Ministry of Defence has experience of purchasing services from the private sector on a vast scale? That is true of aircraft, on which the Ministry spends huge sums of money on sophisticated and secret equipment. The private sector does research on and tends to such equipment, so there is no risk to security and the service is of a high standard.

Mr. Heseltine

My hon. Friend is at the centre of the matter. The defence budget draws great support from the public and the private sector. The loyalty, dedication and skills in both are of the highest. As my hon. Friend rightly said, the central issue is not whether the dockyards have a future, because I have assured them that they have one under this Government. Rosyth cannot say the same under a Labour Government because a significant part of its capability would then be cancelled and destroyed.

Mr. Robert Maclennan (Caithness and Sutherland)

Does the Secretary of State agree that it is pure humbug for the Labour party to claim to be concerned about the future of Rosyth when its policies would virtually wipe out Rosyth's activities? Does he further agree that to dismiss the proposal of my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) that consultations be extended to six months because there have been many unofficial unauthenticated leaks from his Ministry is not good enough and makes his proposal for a two-month consultation period a mere sham?

Mr. Heseltine

The hon. Gentleman is repeating a question that I have already answered. I do not believe that it is a sham. The issues are well understood throughout all of the dockyard areas. The Rosyth dockyard people produced their alternative report before my proposals were published. Of course it does not agree with my proposals, but the idea that they need more time to think about the matter when they have already produced a report including their preferred solution is not realistic. The essence of the proposal that I have made today is that we should make up our minds and address something that has been neglected for far too long.

Mr. D. N. Campbell-Savours (Workington)

Does "remain in British control" mean that as much as 49 per cent. of the equity could be owned by overseas interests?

Mr. Heseltine

The hon. Gentleman knows that there are many ways in which to secure control of a company. I would not tell the House that I have worked out the precise mechanism. I can only say that there is a quite clear commitment that the control of the company will remain firmly in British hands.

Mr. Martin J. O'Neill (Clackmannan)

The Secretary of State has told us that there is still a considerable amount of work to be done—his last answer shows that. If the dockyard unions at Rosyth raise problems because of the deep studies that they have already made, will he be prepared, if necessary, to extend the consultation time beyond three months? How many jobs will be lost at Rosyth in addition to the 2,000 which will be lost at Plymouth? He has not yet made that clear today. Will he bear in mind that the American naval dockyard system operates under a trading account and that Secretary of State Weinberger has ceased any business with the General Dynamics Corporation because of excessive profiteering by that firm in other areas of defence procurement? We shall need to discuss this matter at greater length soon. Will he take the issue up with the Leader of the House to ensure an early and long debate?

Mr. Heseltine

The Opposition parties are never short of opportunities to raise matters in the House if they want to. My right hon. Friend the leader of the House has heard what the hon. Gentleman said and if, through the usual channels, the Opposition want to pursue this matter, I am sure that they will do so, as is usual. I can add nothing to the clear view that the consultation period should end before the House rises for the summer recess. The issues are understood clearly, especially in the dockyards. They have faced us for a long time. We have now entered a period of formal consultation, but the dialogue has been going on for many months. As for the number of job losses at Rosyth, I mentioned 5 per cent. in my statement. That probably represents about 500. I would not expect there to be any compulsory redundancies, as we should be able to achieve that figure through natural wastage and voluntary retirement, and that is before any additional opportunities materialise.