HC Deb 02 December 1985 vol 88 cc27-105

Order for Second Reading read.

3.56 pm
Mr. Dick Douglas (Dunfermline, West)

On a point of order, Mr. Speaker. During business questions on Thursday I raised with the Leader of the House the question of the provision of a report that is available to members of the Select Committee on Defence if they choose to go to a room upstairs and read it. It is a restricted report, but it is also available to the contractors.

I shall quote from phase I of the Touche Ross report to ut my point of order into context. It constitutes an interim stage in a process which will eventually result in a significantly"—

Mr. Speaker

Order. Is the report being given as evidence to a Select Committee? The hon. Gentleman should not quote from a report that is before a Select Committee.

Mr. Douglas

I understand that the phase I report is available in the Library of the House. It is generally available and is not restricted.

Mr. Speaker

What then is the point of order?

Mr. Douglas

I am trying to put my request into context. I shall begin the quotation again. The report "constitutes an interim stage in a process which will eventually result in a significantly longer and more detailed report. This full report, referred to herein as phase II, will attempt to provide prospective contractors with comprehensive background information to assist the preparation of bids for the operation of Rosyth/Devonport dockyards."

The phase H report, which is classified and is available to Members of the Select Committee, is also available to those who are making bids for the dockyard, on the basis that they need to know the nature of the assets for which they will be bidding. The House requires equivalent information before it can adequately ascertain the nature and purpose of the Bill the Second Reading of which the Minister is anxious to begin.

I appreciate that some of the information is likely to be classified, because I have read the document and know that it contains some biographical detail. The Minister is furrowing his forehead, but I am asking you, Mr. Speaker, to examine the report before the Committee stage or, more appropriately, before we go any further with the Bill. I ask that the full content of the phase II report be made available to the House so that we can have the same information as is available to those in private sector industry, who may or who may not be friends of the Minister, and who are bidding for those vital public assets.

Mr. Speaker

Order. I do not think that the point raised by the hon. Gentleman is a matter for me. If the report is before a Select Committee—

Mr. Douglas

It is not.

Mr. Speaker

If it is not, and if, as the hon. Gentleman said, other hon. Members can refer to it, I cannot see that there is any point of order for me. The report is available. I do not understand what the point of order is about.

Mr. Ian Mikardo (Bow and Poplar)

Further to that point of order, Mr. Speaker. It is true that a small number of hon. Members can go and see the report, but the overwhelming mojority of hon. Members are not allowed to see it. One understands that there are circumstances in which that must be so, because some reports must be restricted, but what conceivable justification is there for denying to any hon. Member of the House information that will be circulated round the offices of some companies? If it is freely available in the offices of a company, it cannot be all that sensitive, and thus it should be available to hon. Members. Is it suggested that hon. Members are less trustworthy than clerks in the offices of a company?

Mr. Speaker

I am sympathetic to the point of arder, but I have to repeat that it is not a matter for me. It is up to the Government to make reports available.

4.2 pm

The Minister of State for Defence Procurement (Mr. Norman Lamont)

I am not sure whether this is a point of order, Mr. Speaker, but it is common for certain information to be available to defence contractors, or potential defence contractors, which is not widely available to the House of Commons. Sometimes classified information is available to Select Committees, particularly the Select Committee on Defence, which is not available to the House as a whole. That is the explanation. I shall look at the point that has been raised and see what information can be made available to the House. I do not make a commitment, but I shall see what can be done.

Mr. Speaker

I call the Minister to move the Second Reading of the Bill.

Mr. Lamont

I beg to move, That the Bill be now read a Second time.

I apologise to the House for the absence of the Secretary of State, who has to be abroad today at an important and long-standing NATO meeting. He has given his apologies to the Opposition Front Bench spokesmen.

Mr. Michael Foot (Blaenau Gwent)

I am sorry to interrupt at such an early stage, but the apology should be not only to my right hon. and hon. Friends on the Front Bench but to the House. It is an extraordinary state of affairs. If it was known for a long time that there was an important engagement for the Secretary of State to attend, the debate could have been held on another day. Did the Minister's Department make a request to the Leader of the House for the date to be changed so that the Secretary of State could be here to present his Bill? Some of us remember the controversy over the Bill. For the right hon. Gentleman not to be here is a gross act of discourtesy to the House of Commons. We should like to hear the explanation.

Mr. Lamont

My right hon. Friend has to be at a NATO defence planning meeting, which is an unavoidable commitment. There have been discussions through the usual channels about the timing of the debate. There were also discussions about extending the debate from the original half day to a whole day. That has contributed to the problem.

Hon. Members will recall that my right hon. Friend made his statement on 23 July on the future of the royal dockyards at Devonport and Rosyth. He explained why the Government were convinced that the right way to proceed was for the Government to introduce private management into the royal dockyards, while the Government retained ownership of the fixed assets. The Government, in effect, would be leasing the assets to commercial managers. Since that announcement, and despite further discussion, it remains the Government's view that, of the various options, private management under fixed-term contracts provides the greatest incentive to improving efficiency and reducing operating costs. The purpose of the Bill is to enable the Government to proceed with those plans.

Ever since the Government came to office in 1979 we have attached the highest importance to improving and making more adequate the defences of the United Kingdom. For that reason, defence spending is over 20 per cent. higher in real terms than in 1979, of which the Government and their supporters are justifiably proud, but adequate defences are not ensured simply by increasing spending. That is not the only way in which to increase the security of the country. The Government, through their procurement policies, introducing new competition, and through their policies for improving the management of defence establishments, have been determined that within our large defence budget there should be increasing value for money. That means looking at the ways in which we have customarily conducted defence business, and also that in certain areas we must face the need for change.

Over the past 15 years there have been many studies of the organisation of the dockyards, for example. the Mallabar report and the Speed report. The Public Accounts Committee has produced several reports, the Select Committee on Defence has produced reports, and there have been others. There have been many different recommendations, but all have agreed on the nature of the problems facing the dockyards. Everyone has agreed that there is room for improvement and that changes are necessary. Even the trade unions have said that they consider that there is a need for improvement. Even the Plymouth chamber of commerce, which, I freely admit, has been opposed to the Government's proposals, has said that at worst Her Majesty's dockyard is wasteful and non-competitive. On both sides there has been recognition of the need for improvement.

Mr. Donald Stewart (Western Isles)

Is the Minister aware that that is not the case at all? Many people who agree with the Minister's philosophy about privatisation, and many who share the Government's views on defence, are opposed to the change in the status of the dockyards. They do not agree that it is worth while.

Mr. Lamont

I do not think that the right hon. Gentleman was listening to what I was saying. I did not say that all the reports agreed with the Government's conclusions. I said that they had all analysed the problem and said that improvements were necessary in the operation of the dockyards. That is incontestable.

The Government believe that changes in three areas must be the basis of any new arrangements that are designed to bring about an improvement. First, the dockyards, as suppliers, must be separated from the fleet, as customers. Secondly, accounting procedures need to be introduced that will reflect normal commercial practice so that we know precisely the performance of the yards and the exact costs of meeting the fleet's requirements. Thirdly, local managers should be given more authority to manage. It is against those criteria that we have judged the different options.

We set out those options for change in an open government defence document in April this year. The options in that document range from full privatisation to a trading fund. We made it clear that our preferred option was the introduction of private commercial management. We made it clear that we were prepared to consider alternatives, but that those alternatives would have to he measured against the three criteria that I have described.

The publication of that open government document marked the beginning of a period of consultation, which lasted just under three months. Before that there had been reactions to Mr. Levene's report, which had been leaked, and discussions for many years on the basis of the reports to which I referred. All interested parties were able to express their views. The Select Committee and the Public Accounts Committee published reports in time for us to be able to take them into account.

Although there was considerable criticism of the Government's proposals, the Government—as the Government are entitled to do—did not consider that any of the other options or any of the arguments put forward gave the same benefits in terms of the probability of improving efficiency, improving work practices and giving value for money. Once the Government had made it clear that they were determined to change the dockyards, many people and bodies then favoured change, although I doubt whether that willingness to change would have existed if the Government had not been determined to face the problem, which had been acknowledged in the past but which previous Governments had never faced.

I shall now refer to the provisions of the Bill and to the areas of anxiety to the House and the work force. The Bill is limited. The concept of introducing private management is that contractors will tender to complete work in progress and for a programme of refit work for a period of seven years. The Government intend to set up two companies to operate each of the two dockyards, on or before vesting day, which is intended to be in April 1987. The management and work force associated with the dockyards would be transferred to those two companies. On vesting date, the commercial managers, selected by competition, would take over the companies and transfer their top and supporting management to them. The Ministry of Defence would then place contracts for the repair and refitting of ships with those companies.

Mr. Denzil Davies (Llanelli)

As this is an enabling Bill, will the Minister tell the House what percentage of the total amount of dockyards' work will be subjected to tender? Will it be more, or less, than 50 per cent.?

Mr. Lamont

I shall deal with that in a moment. Perhaps I could develop my argument, but if the right hon. Gentleman wishes to interrupt me, I shall give way again.

Clause 1 governs the transfer of persons employed in the dockyards from Crown employers to a company formed under the Companies Acts, which would then become the employer.

Mr. Douglas

Will the Minister give way?

Mr. Lamont

I should like to proceed a little further.

Under clause 1, that company could be an employing or a management company. Those who have followed the matter in detail will know that we considered having two companies for each dockyard—an employing company and an operating company. That is consistent with the wording of the Bill, but the Government intend that there should be one company—an operating company—for each dockyard. Trade unions and potential contractors made representations to us about that, and the Government responded by changing their view.

Mr. Douglas

The Minister presents the case that the Government are opting for an operating company for each dockyard as if it were almost crystallised. For the benefit of the House, will he state the Government's thinking that led them to choose operating companies rather than employing companies with some corporate management structure?

Mr. Lamont

The structure is simpler. Potential contractors and some trade unions felt that it was simpler and would give them a greater sense of security. That is why the Government changed their mind.

Dr. David Owen (Plymouth, Devonport)

The Minister spoke of one operating company per dockyard, which means that the Government have excluded any possibility of splitting a dockyard into more than two or three separate parts with separate companies. Will he confirm that important point?

Mr. Lamont

It is certainly our intention that there should be one company for each dockyard. I have not considered the option of splitting the dockyards, and, as far as I am aware, that is not under consideration.

Before I develop in more detail precisely how the Government intend to proceed, I shall deal briefly with the other clauses.

Mr. Merlyn Rees (Morley and Leeds, South)

Will the Minister give way?

Mr. Lamont

I have given way many times.

Mr. Rees

I only want to ask a short question. Clause 1(1) refers to the qualified dockyard service employees, who, in my day, were subject to both sections 1 and 2 of the Official Secrets Act 1911. They receive information about vessels, which is of importance to the Soviets and others, as the Americans are showing us. There is nothing in the Bill about the transference of those employees and whether they will remain subject to and have to sign a bit of paper under the Official Secrets Act, section 1—the spying clause—and section 2. If the matter is dealt with later in the Bill, I have asked my question at the wrong time, but does the Act apply?

Mr. Lamont

That is not specified in the legislation, but obviously it is an important point. The same procedures as would normally apply to private defence contractors will apply. I do not foresee any great difficulties about that.

Clause 2 provides that all land at present in the dockyards will, even after vesting day, and regardless of any rights which the contractor might otherwise have, be treated as Crown land for the purposes of the continued rights and powers of the Ministry of Defence police to operate in the dockyard. Clause 2 also ensures that a contractor does not acquire security of tenure if intentionally or otherwise he obtains the tenancy of dockyard land.

Clause 3 provides for my right hon. Friend the Secretary of State to incur expenses in setting up and operating Companies Act companies to provide dockyard services, and, for example, at the end of a fixed-term contract, or in time of tension or war, to assume the liabilities of the company.

Mr. Robin Maxwell-Hyslop (Tiverton)

As my hon. Friend moved rapidly from clause 2 to clause 3, he told us of the powers that the Ministry of Defence police would have. Will the Devon and Cornwall constabulary have duties in respect to Devonport, for which it must make financial provision, but which it does not at present have in respect of the royal dockyard?

Mr. Lamont

I do not think that that will be the case, because the military police will carry on in the same way. I shall certainly investigate my hon. Friend's point, and if I can give him any further information, I shall certainly do SO.

Clause 1 allows the Secretary of State to transfer the ownership of each of the companies that he sets up to a third party, the contractor, who then operates the dockyards on his account. Clearly the selection of the third party concerns the House, and I shall describe the approach that the Government will adopt.

No commitment will be entered into until the Bill has received Royal Assent. [Interruption.] This is big of me, is it not? There have been accusations that the Government were about to do that. Subject to satisfactory progress on the legislation, we shall in the spring issue an invitation to tender for the operation of each of the two dockyards. The tender will cover a period of seven years and will identify a core programme of work for each dockyard. That programme will be sufficient to make each dockyard viable, and, at the beginning, will certainly be equal to the present load of the two dockyards. It will be equivalent to some 70 per cent. of the refit programme.

Mr. Cyril D. Townsend (Bexleyheath)

Will my hon. Friend make it clear that the Government have an open mind about the period of time involved? Is he aware that many of his hon. Friends feel that seven years is too short, and that 10 years would be more realistic, with a review after five years? Seven years is a tight period, considering the huge challenge that the management will face.

Mr. Lamont

The Government originally thought of a five-year period, which we have already extended to seven years. I should have thought that a seven-year period was sufficient to judge the performance of a contractor. We want the contractor to be subject to competition pressure, to have an incentive, and to wonder whether his contract will be renewed. That is one of the main purposes of the Bill. I shall consider my hon. Friend's point, but seven years is a fairly long period.

For the early years of the contract the core will be defined fairly precisely. For the later years it will inevitably be indicative of the work that we expect to be offered to each dockyard. I am sure hon. Members will appreciate that a ship refitting programme of the scope and complexity of that of the Royal Navy inevitably changes and that there is no way in which we can guarantee, in 1986, that a particular amount of work will be needed on a particular ship in 1993. However, the broad shape and volume of the core programme can be laid down in the tender documents. The remainder of the naval programme will also be defined in the tender, but only for information at this stage, as it will be available for consultation between whichever United Kingdom companies wish to bid.

In responding, companies will be expected to put forward detailed proposals in two areas. First, there will be management proposals. The companies will have to submit in detail what their management proposals are, what the qualifications will be of those they intend to appoint to run the dockyards, and what their precise proposals are for reducing costs and increasing efficiency. We shall look at the financial standing of the companies, and we shall need to be satisfied that they are capable of doing the job.

Secondly, part of the tender exercise will be to examine the extent to which the bidder is prepared to put himself at risk. We shall therefore be looking at the pricing proposals. Our intention is that work entering the dockyards should increasingly be negotiated on a fixed price basis rather than on a cost plus basis. We expect that after 18 months or two years about 75 per cent. of the work in the dockyards will be done on that basis. Obviously it will take time to achieve that, and we shall want to look at the pricing proposals for the early period as well. Therefore, bidders' proposals will be evaluated for their commitment and management and price competitiveness.

We intend that the successful bidders should be identified in the autumn of 1986, and at the end of the year there would then be a short period of parallel running with the current management to ensure a smooth transition in April 1987 to full commercial management. At that time, my right hon. Friend would transfer to the contractor the ownership of the company in which the dockyard work force and management had been placed.

Initial contracts for a period of seven years will allow the new management plenty of time to build the two dockyards into a fully commercial pattern of operation and a further substantial period of full commercial activity. After the contract has run for the seven years, we shall look at the achievements of the two commercial companies that have been running the dockyards to see whether we wish to hold a further competition to find new managers for a subsequent contract. In this way, we shall maximise the level of competition.

Mr. Martin J. O'Neill (Clackmannan)

Is the Minister suggesting that there will be a period of 18 months at the beginning, followed by a period of seven years, or is he saying that after 18 months there will be a period of five and a half years, when a decision will be taken?

Mr. Lamont

The contract will run for seven years. I was saying that it will be some time before there can be a fixed price basis for 75 per cent. of the work that we expect. The whole thing, from beginning to end, will run for seven years. The 18 months to two years is merely the transitional period during which we build up to the proportion of fixed price contracts that we want to achieve.

We believe that this approach will provide competition in three different ways. There will be competition between the commercial managers for the initial contract; there will be the continuing competition between the two dockyards and the other ship repair companies for the unallocated programme; and there will be continuous competitive pressure for the next contract—the pressure on existing operators to show that their performance is good enough so that they can win the contract in the future.

We believe that this approach can produce worthwhile savings. Indeed, we owe it to the taxpayer to ensure that the dockyards are operated in the most efficient way possible. There is no conflict between efficiency and military requirements. Indeed, it is very much in the interests of the Royal Navy that our dockyards should be operated in the most efficient way.

None of the proposals that have been put forward as alternatives in our view offer either this level of competition or the prospect of savings and improved efficiency. A trading fund, which some Opposition Members recommended, would not meet the criteria of competition, and would be able to price itself into profit in a way in which the private sector cannot. At the other extreme, full privatisation would simply mean moving from a state monopoly power to a different set of owners and a private sector monopoly.

As my right hon. Friend made clear when he announced his decision in July, he would be prepared to consider the possibility of running the dockyards as a Government-owned public limited company if the discussions with established companies do not produce an attractive basis for operating our own commercial management proposals. The Bill provides for the Government to operate the dockyards in that way if that proves necessary. However, I am glad to report that there is considerable industrial interest in tendering for the management contract.

Mr. Gordon Brown (Dunfermline, East)

Given that the Minister is not ruling out the possibility of a publicly owned company running the dockyards, why does the Bill say that it is designed to transfer persons engaged in dockyard services to the private sector? In Committee, does the Minister intend to rule out the possibility of, for example, debating a public corporation and a trading fund as part of the improvement of dockyard services?

Mr. Lamont

I shall be happy to debate anything that the hon. Gentleman may wish to raise, provided it is in order. As I have made clear, the Bill provides for a Government-owned plc as an interim stage. I was merely saying that if, for any reason, a sufficient number of companies did not want to tender for the contract, or if we did not think that those who tendered were suitable, a Government-owned plc was something on which we could fall back. However, it is the Government's intention to proceed to full contractualisation.

When my right hon. Friend announced the Government's decision, he stated his intention to seek competitive tenders from British companies to manage the dockyards, and he referred to those that had already show an interest. Since then there has been considerable contact between the Department and companies with an interest. Hon. Members may be aware of announcements by the Balfour Beatty/Weir Group and by Babcock International/ Thorn EMI to form groups to prepare bids for the operation of Rosyth. Trafalgar House/Plessey/A and P Appledo:re formed a similar grouping last year to consider a bid for Devenport. Other companies, whose interest has been made public, include British Aerospace, Northern Engineering Industries, GEC, Taylor Woodrow, Tyne Ship Repair and Press Offshore. Representatives from the interested companies have made visits to both dockyards and have been supplied with information so that they can provide responses to an invitation to tender.

Clauses 1(4) to (6) deal with the consequences for personnel who are transferred from the Crown to a company. We understand how unsettling any change, particularly one as significant as this, is for the work force. We are prepared to have further discussions with representatives of the work force so that at the very least they can hear, understand and inform their members of the correct implications for the work force. Misinformation, intentional or otherwise, is in no one's long-term interests, and we have tried extremely hard to explain to the work force precisely what is involved in these proposals.

I come now to the terms and conditions of employment. They are obviously of considerable interest, but I feel that people have nothing to fear from them. Civil servants employed in the royal dockyards on vesting day who transfer to the company set up by my right hon. Friend the Secretary of State will cease to be civil servants, but will transfer on broadly the same terms and conditions of employment as they enjoy at present. That is secured by the Transfer of Undertakings (Protection of Employment) Regulations 1981, to which clause 1(4) refers. These regulations will ensure that most terms and conditions transfer unchanged to the new employer. There will, therefore, be no change, for example, in take-home pay, leave entitlement or retirement policy as a result of the transfer.

Mr. Gordon Brown

What about pensions?

Mr. Lamont

I am coming to pensions. Trade unions' current rights to negotiate on behalf of their members will transfer unchanged. In future they will be able to negotiate a better deal and, if there is improved performance, wages and rewards to mirror that improved performance. Under clause 1(6), staff transferring to the new company will not, of course, be entitled to redundancy compensation, because they are not being made redundant; they are transferring to a new employer. I emphasise that Civil Service levels of compensation will transfer in the same way as any other term or condition of service.

I shall deal now with the important subject of pensions, which I mentioned earlier. These are specifically excluded from the 1981 legislation to which I referred. Employees in the dockyards are at present members of the principal Civil Service pension scheme. After vesting day, when they cease to be civil servants and cannot remain in the scheme, a new pension scheme will be established. We propose to set up such a scheme with benefits similar to those for the Civil Service. We took similar steps for staff who transferred from the Civil Service into the Royal Ordnance plc. We intend that there should be no worsening of pension provisions as a result of the transfer of employment. The benefits to be provided by the new scheme will mirror as closely as possible those of the principal Civil Service pension scheme. I hope that that will meet many of the unnecessary anxieties that have been expressed.

Mr. Jonathan Sayeed (Bristol, East)

Will my hon. Friend confirm that the years that someone has accrued in the Civil Service will count towards his pension entitlement or redundancy pay when he reaches pensionable age or is made redundant?

Mr. Lamont

Yes, I confirm that. They will count in the same way. Proposals on future pension arrangements will be subject to full consultation with the employees and the trade unions. Separate pension arrangements will be made for those recruited into the dockyard operating companies after vesting day. That will be a matter for the management of the operating companies, in consultation with the trade unions.

During the consultation period, and since, many of the most vociferous of the Government's critics on this matter have, in a wholly alarmist and deliberate fashion, emphasised the potential job losses that they forecast as the result of the introduction of commercial management. My right hon. Friend made it clear that in April 1987 there would be a requirement to reduce the numbers employed in both dockyards—at Devonport from just over 13,000 to just over 11,000, and at Rosyth from 6,300 to about 5,900, over two years. Those savings are essential if we are to improve efficiency at both dockyards to allow them to compete effectively and, if possible, win extra work. The Government hope that the introduction of private management will make it possible for the dockyards to compete also for non-military work. Savings of the order that I have described will in any case be essential. They are necessary whatever future management system is chosen for the dockyards. They have nothing to do with the introduction of private management. Such measures are necessary anyway.

From commercial management, we expect to see further improvements in efficiency through changes in working practices, more flexible management and reductions in overheads. The consequences of those improvements will be that fewer men will be needed to carry out the core programme of work, but, as I have said, that relates only to the core. An efficient dockyard will be competitive. A competitive dockyard should be able to gain additional work, and additional work should generate employment. Commercial management is not a risk. It offers a considerable opportunity for the dockyards.

Mr. James Wallace (Orkney and Shetland)

The Minister has said that the principal reason for the measure is savings, although he has not quantified those savings. He will be aware that the Bill's financial effects claim that although the changes in the financial relationship between the Ministry of Defence and the dockyards —are significant, they— are unlikely to have a major effect on central Government expenditure. Why are we going through all these significant changes if the effect is to be so minimal?

Mr. Lamont

The figures have been well debated by the Select Committee on Defence and the Public Accounts Committee. I say this by way of illustration. The Government have always said that the savings after recovery of initial costs could be about £29 million to £33 million, which is about 7.5 per cent. of dockyard turnover. Inevitably, those figures are merely estimates. They are dependent upon whatever assumptions are made. The real test is whether the House and hon. Members believe that private sector management will be more efficient and better at obtaining new work and will be able to alter working practices. We cannot quantify those matters, but we remain convinced that private management can bring about the improvements which report after report have said are necessary. I cannot believe that savings of £33 million, or 7.5 per cent. of turnover, are insignificant in terms of Government expenditure. One document stated that the amount was insignificant in terms of the totality of Government expenditure, but I think that it is worth while in terms of dockyard expenditure. Surely the Government must operate the dockyards and see that their structure is such that they operate in the most efficient way.

Mr. Gordon Brown

Does the Minister accept that his figures of £29 million to £33 million must be set against £60 million of transitional costs necessary to set up the dockyard franchise scheme, and up to £200 million to set up the private pension scheme? If, as those figures show, the Minister is unlikely to save money in the 1980s and well into the 1990s, why is he proceeding with the scheme?

Mr. Lamont

I said that that figure was after the recovery of the initial costs.

Mr. Brown

Give me an answer.

Mr. Lamont

That is the answer. It is the figure after recovery of the initial costs. We cannot say precisely what the savings will be. They depend upon the productivity that the new management obtains. Any figures given are an illustration. We believe strongly that private management is much more likely to generate efficiency and savings than is the case where the customer and the contractor are within the machinery of government.

I shall deal with employment at Devonport, where anxiety is plainly felt about the immediate consequences of the job reductions anounced last April. The Ministry of Defence is working closely with the local authorities to encourage local enterprise. We have joined Plymouth council in setting up the Devonport development unit. One of its first activities has been to promote opportunities for defence subcontract work at an exhibition attended by firms from the south-west. More than 150 firms contacted the Ministry of Defence, with the result that a number of firms have been invited to tender for local purchase orders, and some have been successful. In addition, we are reviewing holdings of land in the area to see what land can be made available for industrial development.

The consequences for local employment are much less severe at Rosyth, as the work load of the dockyard is increasing. The Government's commitment to Rosyth is clear from the massive investment that they are making in the dockyard to carry out Trident refits. I would take the Opposition's concern about unemployment at Rosyth far more seriously if they were not firmly committed to abandoning our only independent deterrent. If I were a worker at Rosyth dockyard, contemplating the future, I would be much more worried—[Interruption.] The Opposition clearly do not like the point that I am about to make. I should be more worried about the Labour party's defence policy being implemented than about the possibility of commercial management being introduced. The Opposition know that that is true and that it is the view of many of the workers at Rosyth.

Throughout the Government's consideration of the future of the dockyards we have been guided by the need to do nothing which would endanger national security. That concern has been uppermost in the Government's mind in both the nuclear and conventional spheres. The decision to introduce commercial management into the dockyards was endorsed by the Navy Board. Ministers do not sit on the Navy Board. The decision that was taken was the preferred option not just of Ministers but of the Royal Navy. The Navy Board believes that national security will not be put at risk by the proposals.

Successive Administrations have proposed changes in the dockyards, but attempts to introduce change have come to nothing. Suddenly the Opposition are again endorsing proposals which they did not carry out when they were in government—proposals which have not worked in the past. Now is the time to make decisions about the matter. Devonport and Rosyth have served the Royal Navy and the country loyally for many generations and their long-term future is assured under the Government's proposals. The Government remain convinced that the introduction of commercial management, with the assets of the dockyards remaining firmly in Government hands, will provide a real spur to efficiency and savings which competition and renewable contracts will bring. The dockyards badly need those things. They will ensure that the operational requirements of the fleet are met, and will continue to be met, and that the strategic interests of the country are safeguarded. I commend the Bill to the House.

4.43 pm
Mr. Denzil Davies (Llanelli)

The Minister and his colleagues have not argued the case for commercial or agency management of the dockyards. They have made various assertions about how much better such management would be, but no case has been put forward to prove that the dockyards would be more efficient in terms of the service that they give and will continue to give to the Royal Navy. The Minister's figures for savings are not illustrative but illusory and have no meaning whatsoever.

I echo the comments made by my right hon. Friend the Member for Blaenau Gwent (Mr. Foot). I accept that Ministers have to go abroad and attend important NATO) meetings, but—and I intend no disrespect to the Minister of State—the Secretary of State should have opened the debate. It may not have been necessary to have the debate today. It could have been put on at a different time. The Bill has only four clauses, and I do not suppose that it will last more than six months in Committee at this rate. Matters could have been arranged to enable the Secretary of State to be here to argue the case in respect of a substantial change that will affect the Royal Navy and thousands of dockyard workers in Devonport and Rosyth.

The Minister made it clear that tonight we shall be voting on an enabling Bill for commercial and agency management of the dockyards. We shall not be voting for some kind of Government-owned company. That is the fall-back position in case the Secretary of State cannot find any contractors. We shall be voting for commercial management. I hope that Conservative Members who have anxieties about the matter will realise that that is what they will be voting for and that that is what they will have to debate in Committee.

The Bill, especially the proposals behind it, is one of the most ill-prepared, poorly researched and irresponsible Bills which even the present Government have introduced over the last six years. The franchise or agency system —call it what one will—may be all right for fast food or other private establishments, but it is not suitable for complex organisations such as the royal dockyards.

The main duty of the dockyards is to maintain the ships of the Royal Navy to the highest state of efficiency and readiness. The Opposition believe that the proposals will do harm to the Navy and damage the livelihood of the thousands of dockyard employees who have served the Navy and the nation with skill and dedication in war and peace. They will be shabbily treated if the Bill becomes law. The Bill will also damage the communities of Plymouth and Rosyth which are so dependent on the royal dockyards for their existence and economic future.

The main motivation behind the Bill is the Government's ideological belief and commitment. The motivation is not first and foremost the well-being of the Royal Navy. In one respect the Government's belief and commitment will be fulfilled if the Bill is passed, because the Secretary of State will be able to show the Prime Minister what a good boy he has been by removing by monthly reductions almost 20,000 civil servants off the books of the Ministry of Defence. That, of course, will have no effect in the real world as they will still have to be paid out of resources provided by the taxpayer.

The Secretary of State wanted to go much further—to remove the dockyards lock, stock and barrel. He wanted to remove the labour, capital, assets, land and everything else. He asked Mr. Peter Levene to look into the matter, but even Mr. Levene in his report, which I can only describe as cavalier and hasty, balked at the enormous problems which would have been caused by selling off the whole of the royal dockyards. As a result, the Secretary of State has produced a botched-up scheme in which the capital and assets are apparently to remain in Crown ownership, but their use is to be provided for and given to some private contractor and, as usual, the workers will be sold out. Most of the work in the first few years—the Minister has not answered this point—will be within the monopoly of a private contractor. There will be a tender for some of the core work, but I challenge the Minister to say what percentage of all the dockyard work in the first few years will be subject to tender and what percentage will be determined by negotiation between the Navy and the private monopoly contractor. The Navy would be in an extremely difficult position to negotiate contracts with a contractor holding a pistol to its head.

A remarkable feature of the Bill is that hardly anyone outside the Ministry of Defence has a good word to say about it. The Minister mentioned the Navy Board, but I get the impression that much of the support within the Ministry of Defence, and certainly much of it in the higher ranks of the Navy, has a touch of the press gang about it.

Agency management is not a new idea concocted by Peter Levene. As the Minister well knows, it was considered and rejected in 1970 by a committee chaired by Sir John Mallabar. In paragraph 103 of part II of Cmnd. 4713, reference is made to two possibilities for agency management. I shall refer only to the first, that the Government could retain ownership and turn the enterprise over to commercial management". That is exactly what is now proposed. Paragraph 104 states: We feel we must dismiss the first of these two almost out of hand. The agency factory arrangement has, we know, been used fairly extensively in times of war emergency but those of us who have had direct experience of its working are satisfied that this is the way to get the worst of both the commercial and the Government Department worlds. We would certainly not recommend it for the dockyards. That is a clear statement by people who had experience of operating agency management, although that experience was confined to factories.

A dockyard is much more difficult to run than a factory. It is far more complex than almost any armaments factory which could be run by agency management. Members of the Mallabar committee who had direct experience of the system clearly stated that it was not the best system either for dockyards or for factories. Mr. Levene, who doubtless has much experience of arms bazaars and arms selling, has very little experience of dockyard management. No one in the Ministry of Defence has the experience of the Mallabar committee in relation to agency arrangements, yet the Government apparently intend to go ahead with their scheme in the face of all the direct evidence provided for the Mallabar committee.

In July 1985, the Select Committee on Defence, in its fourth report, had little good to say about the Government's plan. Without being patronising, I believe that the House owes a debt of gratitude to the members of that Committee for the clarity of analysis and the non-partisan way in which they approached this very difficult subject. It is clear that they were not convinced by the evidence provided by the Government. The report concludes that the Ministry of Defence has not begun to tackle the potential difficulties and that the Government have failed to show that commercial management outweighs the advantages of a trading fund.

The Ministry of Defence was given a further opportunity to provide more evidence, but again it failed to do so and the Select Committee, in its further observations published on 27 November, pointed out that, despite all the objective evidence and all the evidence provided to the Mallabar committee and to the Select Committee, the Government were apparently determined to go ahead with an ill-considered scheme which will damage the vital interests of the nation and of national security.

The Select Committee was absolutely right to say that the Government had not considered the consequences of the scheme that they had outlined. There was evidence of that fairly recently when the Government produced a document to the trade unions—it was not a secret or confidential document—stating that 19 working groups were to be set up to look into the consequences of a decision which had been taken mainly on commercial grounds. The subjects involved show the extent of the problems and complications that will arise but which the Government did not consider before deciding on their proposed course of action. Working group No. 3 will consider the manner in which Naval Base estate and facilities will be made available to the commercial operators and also nuclear safety. Working group No. 4 will be concerned with the overall organisation of the Naval Bases". Working group No. 7 will deal with occupational health and safety. Working group No. 10 will be concerned with naval manpower. Working group No. 16 will deal with security. I should have thought that the Government would consider the consequences of those matters before deciding whether this was the best way to run the royal dockyards.

Not only has there been no support for the Government scheme from any of the impartial evidence at home, but there is no evidence from abroad to support it. On 17 April the Secretary of State tried to give a misleading impression to the House—I do not say that it was deliberate, but it was certainly misleading—when he said that his proposals were based on American experience. That is wholly wrong. The United States dockyards, which are far more complex even than ours because the United States navy is so much larger, are not operated on an agency or commercial basis. They are operated according to a commercial trading fund of the kind that we should like in the future for the dockyards of this country. We can find no evidence that any other navy in the Western Alliance and certainly in Western Europe would consider taking the course that the Government now propose. The French certainly would not dream of it. Nevertheless, despite the internal and external evidence, the Government apparently still intend to go ahead.

The Government recently published a booklet entitled "The Future of the Dockyards". No doubt the people of Rosyth and Devonport will find that an ironic title. In that document the Government set out the two main objectives of the scheme as enhancing the fighting effectiveness of the Fleet and preserving vital strategic interests and securing maximum value for money". None of us objects to any of those aims, but we do not believe—the Minister has not argued the case at all—that the changes will enhance the capability, fighting effectiveness or readiness of the fleet or that they will save any money whatever.

With regard to the enhancement of the effectiveness of the fleet, no one has said in evidence to the Select Committee or in the House that the changes will make the fleet more effective or more ready to meet difficulties and problems in times of emergency. Is the Minister suggesting that the way in which the dockyards operated in the past was to the detriment of the fleet and that the effectiveness of the fleet was impaired as a result? Only a few years ago, management and employees proved themselves in the ultimate test in time of war. Is the Minister really saying that if Balfour Beatty or Trafalgar House had been operating the dockyards they would have performed better in the Falklands war? Three years later, there is to be an enormous upheaval when there is no evidence whatever that the dockyards have ever failed in their primary duty of ensuring the readiness and effectiveness of the fleet.

The question of foreign ownership is very important in terms of the need to safeguard strategic interests. The Minister may have answered some of the questions, but I hope that he will make three points absolutely clear. First —he may already have hinted at this—will he state categorically that only British-controlled companies will be allowed to tender? I accept that it is not always easy to define control in this area, but will he assure the House that only companies controlled by British residents will be allowed to tender? That is a fairly easy question to answer, and I expect the Minister to say yes.

The Minister has said that, first, an operating company will be formed. Presumably the shares of that company will be owned by Trafalgar House or some other parent company that is not solely engaged in dockyard activities. What plans do the Government have to ensure that the operating company and, subsequently, the parent company do not fall within the control of foreign ownership? We know what happened to the golden share; we know what happened to British Telecom; and we think we know what will happen to the royal ordnance factories. Will the same proposals apply to Trafalgar House? If 15 per cent. of the shares of Trafalgar House are bought by foreign shareholders, will the contracts between the Ministry of Defence and the subsidiary of Trafalgar House be terminated? The Minister has not mentioned that. It is not in the Bill. I hope that the Minister will make it clear that foreign ownership of the operating company will not be allowed.

We have been told that 30 per cent. of the dockyard work will be put out to tender. Will the Minister make it clear that the tender will not be allowed to go to any foreign yards—that only British yards will be allowed to tender for that 30 per cent.?

We do not believe that the proposals will enhance the effectiveness of the Navy or save money. The evidence to the Select Committee shows that it was the hope of saving money that led the Navy Board reluctantly to acquiesce in the proposals. In paragraph 408, Rear Admiral George makes that point quite clearly: I think we are in an area of speculation. That is absolutely clear. He continued: It is largely the pressure on the defence budget which has led the Admiralty Board to consider matters of saving money in that area of support. The acquiescence of the Navy was obtained because it believed that money could be saved, not because the plans would enhance the effectiveness of the support services or the effectiveness and readiness of the fleet.

It has been said that between £24 million and £26 million will be saved. The figures have been put out with a precision that makes us suspicious. The Minister has said that, whatever illustrative figures are used, he does not know how much money will be saved or, indeed, whether any money will be saved. The 24th report of the Public Accounts Committee made this point clearly when it stated: On the basis of information supplied to us, we have misgivings about the thoroughness and accuracy of the Ministry's costings. Later, it was said, in effect, that the calculations provided no valid basis to judge whether any materially increased efficiency attached to the Government's preferred option. The Select Committee made exactly the same point. Even if these figures are correct—and I do not think they are—why go through this upheaval to save about £24 million when the turnover of the dockyards is between £400 million and £500 million a year? It does not seem worth it in terms of morale and the effect it will have on the Navy and employees. We do not believe that the plans will save money or that they will enhance the operation of the fleet.

The Minister has said that the tender— an area of considerable difficulty and obfuscation—will be for the core work. I challenge him to say that the tender will be based upon figures for over 50 per cent. of the work carried out in the dockyards. Some people have said that the tender will relate to 5 per cent., 7 per cent. or perhaps 10 per cent. of the work for only the first few years and that once the tenderer has the contract on the basis of 10 per cent., he will be given extra work—up to 70 per cent. of the total core work. The Minister should tell us how he defines core work. He did not define the work to which he alluded when he spoke about the percentage of work that would be tendered for by private contractors.

We are concerned about more than the core work that is carried out in the dockyards. Dockyards also carry out what is called emergent or unprogrammed work—in other words, work that is found when a frigate is opened repairs or refitting. An example is the work that ensued when builders came to my house to carry out a conversion and discovered dry rot. How are the prices to be arranged? How can the tender apply to work that nobody knows is needed? Will a frigate be left standing while negotiations continue between the Navy and a private monopoly supplier?

These considerations are especially important when nuclear submarines are involved. I am told that there are great difficulties when nuclear submarines are refitted or repaired. Apparently it can take months to get all the authorities to deal with the problems that arise with nuclear reactors and nuclear submarines. Will this work be determined by negotiation between a private supplier, who has a complete monopoly, and the Navy, which, in effect, will have a pistol held to its head to accept the price quoted by the supplier without any recourse because it needs the frigate or submarine to be refitted or repaired?

Does the Minister say that it is possible to arrive at a price for emergency work before the work is done? The Levene report made this issue quite clear. Paragraph 3 of this famous leaked report states: I also found that the lack of the normal market forces meant that the dockyard undertook a wide range of what in commercial terms are almost certainly uneconomic activities. That is right, for the dockyards do, in commercial terms, undertake uneconomic activities. The object of the Bill is to ensure that these activities are carried out on a commercial basis by private contractors. It will cost the Navy more if those activities are carried out on a commercial basis. What percentage of the dockyard work will be subject to competition and what percentage will be determined by negotiation between the monopoly supplier and the Navy, which will be a capital consumer?

The Mallabar report recommended that a trading fund should be set up for the dockyards. We know that the United States navy operates through a trading fund. The old Expenditure Committee of 1975 also recommended a trading fund for the dockyards. The report prepared by the hon. Member for Ashford (Mr. Speed), when he was the Navy Minister, recommended a trading fund for the dockyards. The Select Committee on Defence, although it has not exactly said so, favours the concept. The right hon. Member for Spelthorne (Sir H. Atkins) shakes his head. The evidence available favours a trading fund over what the Government have suggested.

Sir Humphrey Atkins (Spelthorne)

The Select Committee was careful not to make any recommendations. If the right hon. Gentleman reads the report again, he will find that that is so. With respect, he is not entitled to say that the report favours a certain course.

Mr. Davies

I did not say "recommendation". I accept entirely what the Chairman of the Select Committee, the right hon. Gentleman, has said, but I am entitled to submit my interpretation of the two reports. It seems that, in the light of the evidence, the Select Committee favours a trading fund, not commercial management. The trade unions favour a trading fund, as do most external reports.

Mr. Sayeed

The right hon. Gentleman has prayed in aid the Mallabar report. Perhaps he will tell us why the then Labour Government did not implement its proposals.

Mr. Davies

I have no idea; and I have no idea why the Conservative Government of 1974 did not either. The hon. Gentleman will recall that a Conservative Government were elected in 1974. That Administration could have put into operation the recommendations of the Mallabar report. The hon. Gentleman has not made a very sensible point.

The Minister was scathing about trading funds and suggested that they are terrible things, but it is possible to obtain commercial accounting and management by means of a trading fund. The Minister will recall the debates that took place last year in Committee on the privatisation of the royal ordnance factories. The ROFs have operated for some time on the principle of a trading fund and have made large profits. The profits were so large that the Secretary of State decided that he could sell off large chunks of them on the stock market and obtain a great deal of money for them. I shall be interested to see whether they are as successful when they come under private ownership as they were when they operated as a trading fund.

The Royal Mint has been operated as a trading fund for a number of years. In 1971 the Government introduced the Atomic Energy Authority Bill, which now enshrines in statute the concept of a trading fund to run the authority. There is no reason why commercial management and the freeing of constraints on management should not be undertaken by means of a trading fund Bill or by setting up a trading fund. If some changes are needed to the Government Trading Funds Act 1973, let us make them.

As I have said, it is possible to run the dockyards in a manner that frees them of commercial constraints and in the interests of the Royal Navy, not those of private shareholders. It is possible to achieve all the changes that we want to see by means of a Government trading fund.

The Opposition believe that the Minister of State should take away the Bill. He knows in his heart that it makes no sense. Indeed, he knows that the Bill is nuts. He knows that it is wrong and that it will not work. He knows also that it is not in the best interests of the Royal Navy or of the people who, at the end of the day, the Government will need to operate the dockyards in times of war and peace. That is why the Minister should take away the Bill. Instead, he should establish a trading fund. We could then introduce the necessary changes.

5.14 pm
Miss Janet Fookes (Plymouth, Drake)

I hope that I shall not be considered parochial if I do not direct my immediate attention to Rosyth. I am sure that there are hon. Members on both sides of the House who will be glad to take a more detailed interest in that yard. I suspect that what I say about the dockyard nearest to my constituency will apply also to Rosyth.

As one of the three hon. Members representing Plymouth, I have a deep and local interest in the Bill. I do not pretend that the worries of my constituents and of the other citizens of Plymouth are not foremost in my thinking. It is right and proper that a constituency Member should have those worries closest to the heart.

I appreciate that we are considering a major defence establishment which has the vital task of servicing Royal Navy ships and carrying out repairs and refits. There is, of course, a major national interest in that activity. Therefore, I have to take into account both a local and a national interest. I hope and believe that there need be no conflict between the two. However, I must tell the Minister that I have serious reservations about the course on which the Government are embarked, which has been confirmed this afternoon.

I accept, along with other individuals, organisations and Select Committees, the need for some change in the organisation of the dockyards. In saying that, I am paying no disrespect to the work force, which can only be as good as those who lead it and the system under which it has to operate. Given those circumstances, the work force has done a good job in the past and will, I am sure, continue so to perform in future.

I accept also that the present system leaves much to be desired. Some of the shortcomings go back even further, perhaps, than the Mallabar report. It is instructive that the Mallabar committee was set in motion by a Labour Government. When the right hon. Member for Llanelli (Mr. Davies) inquires why the Conservatives did not implement the changes that it recommended in 1974, I must remind him that that Conservative Government were in no position to do any such thing. He will recall that the Conservatives lost both elections in 1974. I for one have good reason to recall the October 1974 general election with the utmost vividness. However, that is water under the bridge. I believe that there is a case for change and that what really matters is the format of the change. I have been disturbed by the short period of consultation to which my hon. Friend the Minister referred briefly. It seems that virtually a year was wasted—in any event, it was not spent profitably—between the leaking of the Levene report and the announcement which was made by my right hon. Friend the Secretary of State in April of this year. That could have been a year spent usefully at greater leisure, whereas in the event we had exceedingly rushed consultation and great difficulties for all concerned. I am not in the least surprised that many of my constituents, dockyard workers and others, were led to the conclusion that the consultation was a mere pretence, a mere mockery, and that a firm decision had already been made. I share that view somewhat, even though my own Government were thus engaged.

Now that the Bill is before us, we shall have a further opportunity to consider in detail what is on offer. However, there is a difficulty in the format of the Bill as it is enabling legislation and has been drafted with a broad brush. Accordingly, it allows for several different possibilities. It is not too much to say that many of the key decisions will be taken independent of the course of the measure. These decisions will have a major bearing on what finally happens about the organisation of the royal dockyards.

I am glad that the Minister has put it on the record that conditions of service, especially pension rights and redundancy payments, will not be affected adversely by any change. When people are worried and disturbed about their future, as many are in Plymouth, it is easy for them to be worried unnecessarily. I hope that my hon. Friend's remarks will be widely disseminated and, if necessary, repeated again and again so that at least those involved will have no worries about the basics of their employment.

Perhaps it is not sufficiently understood outside the west country how large a place the dockyard occupies within the economy of Plymouth. The dockyard is by far the largest employer in the area, as well as the oldest. It has a history that spans several hundred years. Any changes in the organisation of the dockyard will send ripples through the 12,000 or 13,000 members of the work force and have repercussions beyond that will affect all those who work in the yard, or who hope to work there. The same can be said for their families. It should be understood that Plymouth is undergoing a traumatic experience, which is not limited to the immediate confines of the city. I see my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) smiling his acceptance of that. This matter is of the utmost importance for Plymouth and the surrounding area. Nothing else has caused so much anguish and excitement during the past month since the changes were announced, leaked or otherwise brought to public attention.

I pay tribute to the changes already in hand. at the dockyard under the leadership of the managing director. I have the highest regard for Mr. David Johnson, the present managing director, who is giving an excellent lead to the work force at a time of the greatest difficulty and worry. Progress is being made in dealing with the worries that have been expressed about absenteeism, the excessive overtime worked and slippage in refit and repair work. There have been notable improvements. It is right that tribute should be paid to Mr. Johnson and to the work force for their co-operation during these difficult times.

I wish to discuss the formula of the Bill. I am somewhat dismayed that the Government are so set upon the commercial option—the preferred option as it is called in the consultation document. I have stated publicly, and I state now, that, although changes outside the Civil Service are necessary, I dislike the commercial option. I infinitely prefer the more proven method of forming a public limited company. We could then be more certain that those running the company had at heart the interests not only of the dockyard but of the local work force and local economy.

One drawback of the option favoured by the Government is that which the Minister puts forward as an advantage—the possible change in contractors because of the limited period, originally of five years but now extended to seven years. My hon. Friend must understand that for those who live and work there, that is only a short time. So there is always an element of uncertainty. Most human beings, and I include myself among that majority, dislike uncertainty. It is unsettling, nerve-wracking and worrying. There is bound to be uncertainty because of the competitive edge syndrome with which the Government are flirting.

If the Government cannot change to the plc fallback position, which is my preferred option, I hope that they will take up the option mentioned by my hon. Friend the Member for Bexleyheath (Mr. Townsend) and go for the 10-year period rather than seven years. At the outset, that would provide employees with a little more sense of permanence and set their minds at rest more than the seven-year period would. That is a second-best option, but I am realistic enough to appreciate that, in all probability, the Bill will go through. It allows the Government to take either option. If the Government go ahead with the commercial option, I ask that a longer period be seriously considered.

I pray in aid the fact that the plc is a far better method of achieving what the Government and I want: a dockyard operating at maximum efficiency with proper safeguards for those who work and do a good job there. I do not understand why we must choose an unproven formula when a more obvious option is available to us. I accept the need to go beyond the trading fund, which the right hon. Member for Llanelli does not wish to do, but I fail to understand why we cannot have a proven formula rather than an untried one.

Mr. Douglas

I am intrigued by the hon. Lady's argument. Where in the world does the proven formula of a Government wholly-owned plc operate for the refit and maintenance of naval vessels?

Miss Fookes

I did not suggest applying the formula to the repair of vessels. I meant it as a legal entity which was well known and understood. I am sorry if the hon. Gentleman misunderstood me.

When the consultation period was announced, the city of Plymouth. which has an obvious interest in employment prospects and the prosperity of the local economy, was moved to employ the famous firm of accountants Peat Marwick Mitchell and Company, which operates internationally, to undertake a rapid inquiry into the options available. It had to be rapid because of the time scale of the consultation. The report, which was made in record time, is a worthwhile document. I am sorry that the Government have not given it the serious consideration that it deserves. Page 66 of the report sets out briefly the firm's views on each of the main options. On the trading option, the report states: Easy option to implement with prospects of some early efficiency gains, but longer term benefits and contribution to local economy could be severely limited by constraints on management freedom. On the public corporation or Government-owned company it states: Option providing the best prospects for progressive improvement in efficiency with diversification and contribution to the local economy, providing adequate management freedom can be arranged. On the commercial or agency management approach—the Government's preferred option—the report states: An experimental approach which would be difficult and costly to implement and administer, and which offers uncertain prospects for the local economy. I listened carefully to my hon. Friend's opening remarks and I shall listen attentively to his concluding remarks, but nothing in his statements so far comforts me when I read the conclusion of Peat Marwick, which is a commercial firm of the utmost repute and standing. I ask that the Government reconsider their chosen option. Nothing in the Bill prevents them from doing so because the Bill provides that they can choose either option. That makes it more difficult for me as I prefer one option. But both are in the Bill, and I can be guided only by the Government's declaration of intent.

I hope that during the remaining stages of our consideration of the Bill we shall have additional information about precisely the contract that the Government have in mind and more details about those firms that are, or may be, seriously interested. There is a belief in Plymouth that the number of serious contenders is decreasing rapidly. If that is the case, considerable doubt is thrown on the commercial option chosen by the Government. I await that with interest, but in the meantime I must decide how to vote tonight. I am not satisfied with the case made by the Government for their preferred option, although I accept the need for change. In those circumstances, unless the Minister gives the House some new information tonight, I cannot consider supporting the Bill.

5.30 pm
Dr. David Owen (Plymouth, Devonport)

Many of those who voted for the hon. Member for Plymouth, Drake (Miss Fookes) will hope that her views on the Bill will lead her into the Division Lobby to vote against it. That would be a more accurate reflection of the feeling in Plymouth of let-down and, indeed, of anger over this legislation.

It is extraordinary that the Secretary of State for Defence is not here today. We understand that he has commitments with NATO, but since the business of the House is the responsibility of the Leader of the House, it should have been perfectly possible for him to arrange the debate for a day when the Secretary of State did not need to attend a NATO meeting. Since the legislation owes its inception and design almost solely to the Secretary of State, it is even more insulting that he is not here to justify it.

The Bill has attracted an extraordinary amount of hostility from hon. Members on both sides of the House. I have been in the House for nearly 20 years, and I cannot remember a Bill that was so extensively mauled and savaged by two all-party Select Committees. The all-party Select Committee on Defence has twice raised grave doubts about whether the legislation will safeguard the fighting efficiency of the Royal Navy. The Public Accounts Committee, which is commonly regarded as the most authoritative and independent of the Select Committees, has not only called in question the scheme, but has mentioned the probability that its implementation will cost the naval budget substantially more during the next four to five years than would one of the other options.

The SDP believes that the best option—the one that should have been implemented a long time ago—is the trading fund run by the Civil Service. Many workers and trade unionists in the dockyards have long wanted the separation of their accountancy and financial operations, because they have been all too conscious of the difficulty of comparing their work, which they believe to be efficient and cost-effective, with outside industry. They have always had to carry the vast overheads of the naval bases. Therefore. there is no sizeable opposition to the idea that we should have a separate trading fund and then judge the dockyards' efficiency on its merits.

The Bill is not privatisation; it is piratisation. The Government have decided to privatise a national asset that has served the country well for centuries. That is the Government's philosophy. Have they used such a scheme in any previous privatisations? The answer is emphatically no. Did British Telecom, will British Gas, or did any of the privatisations involve the control of assets by the Government, but the separation of those assets from the work forces and managements?

Does any hon. Member who operates a commercial company genuinely believe that he could separate the investment and assets from the management and work force of his company? No industrialist, apart from Mr. Levene, has publicly advocated that course.

The independent firm of accountants, Peat Marwick Mitchell and Company, castigated the scheme and demonstrated that it was not an effective way of running a commercial organisation. Since the idea was floated, I have talked to a vast number of industrialists. They have all reached the conclusions that were reached in the Mallabar report. They dismissed the scheme, because they have run companies and know that it cannot be done.

The fatal flaw of the legislation is the belief that we can separate the assets from the management and the work force. What is so tragic about the Government's decision is that one of the problems in the dockyards in the 1960s was the neglect of their assets. When I was a Minister dealing with the dockyards, the then Labour Government made certain from 1969 onwards—it continued under successive Governments through the 1970s and 1980s—that there was a massive injection of resources into the dockyards to give them the capital assets that they needed. Of course, the Secretary of State cannot privatise the entire dockyards, because no one could find enough money to buy their vast capital assets.

The managers of the new company that will be set up under the Government's preferred option will be given seven-year contracts which must, by their nature, be from time to time broken. If contracts are continued in perpetuity, the purpose of the Bill as set out by the Minister will be thwarted. If there must be competition, it must be shown to be effective competition. That means that the company which employs those men as well as manages the dockyards will, at least after the fifth year, operate under the question mark of whether its contract will be renewed. If it is not renewed, a new company will be asked to take on the existing work force. However, there can he no guarantee that it will take on that work force, unless the Ministry of Defence tells us that such a guarantee will be part of the contract. One reason why the Government cannot give a guarantee that the work force will be re-employed is that the tenders will be based on a work load to be allocated.

That is where this privatisation is uniquely different from previous privatisations. When someone was transferred from British Telecom into the new privatised company, he had a reasonable expectation that if he worked well and efficiently he would spend the rest of his days until retirement in that company. That is not the case now. No such continuity of employment can be offered. The contracts of employees can be terminated at the end of the management contract. That is an extraordinary method of rewarding people who have served the country for many decades. During the Falklands war, Ministers and all hon. Members paid tribute to the work of those employees.

The Bill will mean that the Government can strip off the dockyards' assets and control them, but there will be no integrated operation. The workers will be given no guarantee of continuity of employment and hanging over them at all times will be the question of the future work load. That will affect not only those employed in the dockyard, but the city or town in whose economy the dockyard is a crucial element. Problems will radiate into the travel-to-work areas surrounding Plymouth in Cornwall and Devon. The problems at Rosyth will be similar, although on a slightly smaller scale.

The Government must ask themselves for how much longer they can justify introducing such legislation simply because they have an in-built majority. At what stage in a democracy is it possible to restrain people from taking industrial action? At what stage can hon. Members demonstrate to people who are anxious and depressed about their future employment that they can trust the democratic process?

The consultation period was laughably short. We argued with our constituents and told them to trust the process. We held a mass meeting in Plymouth—on an all-party basis—we rallied both Plymouth city council and the Devon county council who commissioned the Peat Marwick Mitchell report, we tried to keep the campaign on an all-party basis as far as possible and then we put in evidence to the Select Committees. Those Select Committees, on an all-party basis, criticised the Government. At what stage is it, in a genuine and true democracy, that a Secretary of State listens? I hope that the Secretary of State will read Hansard—it should not be asking too much of him. If he does, perhaps he will ponder the possibility that there has been an error.

The Secretary of State might then ask himself why anybody should take on this management contract. The people who may tender for the contract will tender for one reason only—they have substantial defence interests and for other reasons and other contracts wish to keep in with the procurement executive, and in particular with Mr. Levene. I have talked to some of the people involved, and they show no enthusiasm for the contract, for one major reason. They say that it will be hard enough to manage the dockyard, but to do it against a work force that feels that it has been bludgeoned into this and is resentful at the process, and which has already absorbed 2,000 redundancies, will be impossible. We should remember that this arrangement takes place only after Devonport has lost those 2,000 jobs by fiat from the Secretary of State. This is a pretty unsatisfactory management contract for anybody to take on.

In addition, as a reserve position, the Secretary of State has said that if nobody turns up to bid for a contract, because the terms on offer are so bad, he will consider running the dockyards, for an interim period, as a Government-owned plc, which is the preferred option of the hon. Member for Drake. On what basis does she prefer it—as a standby to tide over the Government until the election is over and a new contract comes in? That is not an option.

There is one different option for the Secretary of State, which is to say to the unions and the labour force in Rosyth and Devonport, "You do not like what I have introduced. This is the legislation that I want, but I am prepared to talk to see whether we can come to some new arrangement." The Secretary of State has ample reason for doing this, because it is recommended in the second report of the Select Committee on Defence. The reports ends: We urge the Government to approach the debates on the Dockyards Services Bill with an open mind and a readiness to draw fully upon the opinions expressed from all quarters, in the best interests of the fighting efficiency of the Fleet and of the defence and security of the nation. If the Navy Board, which was once the Admiralty Board, with which some of us were proud to be associated, cannot realise that it is embarking on a serious course in terms of endangering the efficiency of the Navy, it is time that at least the Minister did.

The Minister of State has been saddled with a thankless task. The Secretary of State drags him back from a foreign trip to deal with the matter and then walks away. In his previous incarnation the Minister showed himself to be not without any understanding about trade unions, unemployment and the fears of the work force. I challenge him: Why does he not talk to the trade unions and ask what they can agree together? I point out to the hon. Member for Drake that agreement on an interim measure with the trade unions could not be achieved. They will want to ensure, and have a right to ask, that whatever comes out is permanent. There must be new permanent arrangements, even if they are not what I want—a trading fund within the Civil Service.

There are grounds for arguing for a Government-owned commercial company. The Government are obsessed with cutting Civil Service numbers, and will undoubtedly be able to take the dockyards out of the Civil Service through this method. However, the dockyards must be an integrated unit, a single unified company, which owns assets, manages the company and employs the work force, and in which the Ministry of Defence is the predominant and sole owner. If the Government wish to introduce worker shares, I should not be against that, but the Ministry of Defence must be the controlling interest in a company that operates commercially.

There would be some advantage for the unions in such a scheme. I have been involved in some of the negotiations in the industrial Civil Service, and I know of the difficulty in getting the Civil Service machine to recognise the dockyards as being an industry and to grant them a proper productivity deal. I know that the work force would be apprehensive about leaving the Civil Service, particularly white-collar civil servants who have previously been able to transfer to other parts of the Civil Service. They might be able to negotiate some transfer arrangement, It is not impossible for there to be far greater agreement than even the Minister of State might envisage, provided that the arrangement is permanent, honoured by both sides of the House, with no yo-yoing around from private to public ownership, a company owned by the Ministry of Defence, outside the Civil Service, run as an integrated operation, and permanent.

Miss Fookes

I do not wish to interrupt the right hon. Gentleman in the middle of his discourse, but I wish to make it clear that I am not interested in an interim arrangement either. When I suggested a plc as a possible formula, it was on a permanent, not an interim, basis.

Dr. Owen

That only goes to show that the hon. Lady should join us in voting against the Bill. On any interpretation of the Bill, as the Minister said, it will implement commercial management. Nothing has been said to give any sign that the Government are prepared to change the Bill so that it deals not with commercial management, but with the Government retaining control over a critical strategic asset of great importance to the Navy and the country. That is all that we ask.

I would regret it if the dockyard work force moved out of the Civil Service. This is a sad way to pay back the honourable record of service that we have all had from the dockyards' labour force. However, it is indefensible to continue with this mish-mash of commercial management, during which no guarantee can be given of a successful enterprise.

The history of this episode is important, so I shall remind the Minister of it because he may not have been briefed on it by his civil servants. After the hon. Member for Ashford (Mr. Speed) had been kicked out, the Government tried to ditch his report. If any of this had been promised in the 1983 election, the make-up of Parliament would have been different and the hon. Member for Drake might not have been here. Throughout the 1983 general election campaign there was no glimmer of this plan. The election was fought on the basis of the Speed report.

After that report, the people in the dockyards were told that they must be prepared to see their work and efficiency checked against that of private industry. The unions did not like it, but they accepted it. They accepted a plan whereby a submarine and a frigate would go out to private contract, and a similar frigate and submarine would be refitted in Devonport, which was chosen because the ships were comparable. The exercise was set up as a fair and reasonable way to compare costs.

No sooner had the exercise been started than there was a leak from the Levene report. What integrity was involved in that arrangement? The trade unions were asked, in fair competition, to see whether they could compete with private yards. They accepted the challenge and were prepared to carry out the exercise, but suddenly the rug was pulled from underneath them and they were then faced with the Levene proposals. The exercise has still gone ahead. and I think that the Minister will find out what has happened in the past.

It is incredibly difficult to make a fair comparison between even two submarines that have been chosen for fair comparison. One submarine may be opened up to find that there is rust and that the electrics have gone, while the other may be perfectly all right, even though they are about the same age. Exactly the same may apply to a frigate. When its insides are opened up and problems are revealed, the private contractor will have to go back to the Ministry of Defence and say that its tender will have to be completely changed.

The dockyards are to the Navy what a garage is to those of us who have cars. We expect a garage to be ready when our car breaks down and to have the capacity to deal instantly with our problems. It is not possible to programme the cars all the way through, nor is it possible to programme all the naval ships. We tie up vast capital assets in the naval ships and it is in our, the Navy's and NATO's interests that those ships are turned around quickly when something goes wrong. In order to operate such a refitting dockyard, there must be the capacity to respond in emergencies. a certain degree of spare capacity and, above all, the good will of the work force. The work force must understand that it is in a high security business, dealing with classified documentation, serving the nation and the Navy, and it must be proud of doing so.

To smash all that for want of a readiness to get round a table is a tragedy. That is what the Bill will do. There will be no attempt to reach a solid agreement with some of the most reasonable men and women trade unionists in Britain. They are not mindless militants, but are some of the best people in Britain, and it is a tragedy that they should be treated in this way. Has the matter ever been discussed with them? No. Those hon. Members who are wondering which way to vote should remember that the proposals have never been discussed in any serious way with trade unionists. They have been presented to them as a fait accompli at each stage. The trade unionists have their preferred option. Some may not agree with me about a trading fund and would prefer other things, but they are in the business of negotiating. They are predominantly trade unionists. If the employer—the Secretary of State—asked them to see whether some agreement could be reached, he might well be surprised.

The Government have a massive majority. We all know that the Bill can be pushed through without a single amendment. There is no doubt about that, because in order for an amendment to succeed a Conservative Member must be ready to vote with the Labour and Social Democratic Members of the Committee. We are in the business of trying to sort something out of this frightful mess. Believe me, that is what it is. One has only to listen to the right hon. Gentleman speaking of the 19 working parties to know that, and many of those 19 working parties have already formed sub-committees. The whole thing is a complete farce. Has anyone considered the way in which the naval dockyards intermesh with the naval base and Government Departments?

I urge the Minister to do what the all-party Select Committee on Defence has urged him to do—to think objectively about this again. There is no better form of doing that than to discuss it around the table with some of the men and women who will have to implement the mess. He would be surprised how much good will would come from such consultation. Out of it we might be able to produce a structure for the dockyard that would last.

Most of us are terrified that we shall have doctrinal, ideological semi-privatisation for the two dockyards, both of which are immensley important. I have talked mainly about Plymouth, but the Rosyth dockyard, with the refitting of Polaris, could hardly be more important to Britain's security and future. We are terrified that the Government will give up the opportunity of getting something that could he endorsed, even with grudging acceptance here and there, by most people who work in the dockyards, and by most political parties, and that we would have a structure that would last into the next century. All that is in prospect at the moment is a bitterly contested political argument about the dockyards which will go on right up to and through the general election and will almost certainly be changed after the general election, all for the lack of a readiness to do what people in Britain ought to do—to try to reach an agreement, and, in particular, to involve people who work within the dockyard.

It is in that spirit that I urge the Minister to think again. It is in the spirit that this is a thoroughly bad piece of legislation which will do grave damage to the Royal Navy, to the fighting efficiency of the fleet and the long-standing commitment of people in the dockyards and to the Navy that we in the Social Democratic and Liberal parties will vote against the Bill tonight.

5.54 pm
Mr. Robert Hicks (Cornwall, South-East)

It is essential in any debate dealing with proposals to alter fundamentally the management of the royal dockyards to keep constantly in our minds two inter-related considerations which factually are not in dispute. They are simply that we are talking about Britain's defence obligations and our national security in particular, and, within that context, how best the dockyards can service the Royal Navy. That, after all, is the principal function and purpose of the dockyards.

There would be a general consensus that the performance of the royal dockyards has not been as good as one would have wished. However, that is not entirely due to the failings of the management or work force. The constraints placed on our existing system have contributed to the unsatisfactory situation. Consequently, in recent years, as many hon. Members have said, there have been a series of investigations and reports, the most recent of which are the Mallabar, Speed and Levene reports.

As someone who has lived all his life within the Plymouth area and who has therefore been related to many of the work force in the dockyard, what interests me is that if, during the course of the past 15 years, two reports have recommended the introduction of a trading fund concept and rejected the concept of commercial or agency management, why, within the course of the past two years, has there been a fundamental change of outlook?

There is general acceptance that there are three specific areas in which changes are essential if the dockyards are to operate with greater efficiency. First, as has already been mentioned, the dockyards as suppliers should be clearly separated from the Royal Navy as the customer. We are all aware of the inherent problems that arise from that unsatisfactory position. Secondly, most hon. Members would agree that local managers should have greater authority and freedom to manage. Thirdly, most people would take the view that accounting procedures reflecting normal commercial practice should be introduced so that performance within the royal dockyards can be properly assessed.

Let me recall the sequence of events in order to put my observations into context. In April my right hon. Friend the Secretary of State for Defence published his consultative document. In it were the three options. They were, first, full-scale privatisation; secondly, the introduction of the trading fund concept; and, thirdly—the preferred option—the imposition of some system of commercial management. I argued at the time for the establishment of a trading fund with the work force either inside or outside the Civil Service. In practice, the latter structure would have been possible.

It is relevant to emphasise, as was pointed out by my hon. Friend the Member for Plymouth, Drake (Miss Fookes) and the right hon. Member for Plymouth, Devonport (Dr. Owen), that immediately after the publication of the consultative document a local steering group was formed. It consisted of local authority members, both at county and district level, representatives of the trade unions and a number of other interested parties and organisations, including the four local Members of Parliament who are most involved. A report was commissioned by the accountants, Peat Marwick Mitchell and Company. In his summary Mr. Roger Harris of Peat Marwick said that he felt that the Government had not given due justice to the potential merit of adopting a public sector, non-Civil Service option. He was also critical in his report of the Government's preferred option.

I have always hoped, and have expressed his view locally in public, that some solution might emerge that would unite the existing management and the local work force. I have expressed the hope that, based on these twin props, a consensus would be evolved which would go some way towards satisfying the three criteria that were laid down by the Secretary of State in his consultative document but which would retain the dockyard work force entity of management and employees as we know it.

I make no apology for mentioning specifically Devonport. I have already referred to the fact that I have lived in the vicinity all my life. It is worth spelling out, as this is fundamental to the Government's proposals, that Plymouth, south-east Cornwall, south-west Devon and the Royal Navy dockyard are closely integrated and interdependent. Performance at Devonport under its present management improved significantly during the past two years. The efforts of all concerned during the Falklands dispute have, rightly, been universally acknowledged. In addition, comparisons with the private sector relating to the refitting of ships and submarines are favourable to the dockyard in terms of quality and timing. However, the Government have ignored all the advice and criticism. They have also ignored the majority of the recommendations that they received in response to their consultative document, including those from the Select Committeee on Defence and the Public Accounts Committee. Both of those Select Committees questioned the projected financial savings, on the basis of insufficient evidence. The Select Committee on Defence also outlined the various difficulties inherent in any commercial management option.

These criticisms—the problems that will be created through the introduction of this form of commercial management and doubt about the savings that it is claimed will be made—have not yet been satisfactorily answered during the debate, in exchanges in this House on previous occasions, or in the response of the Ministry of Defence to the Select Committee's initial report. I understand that the Select Committee on Defence is now worried about the enhanced uncertainty factor. This point is relevant, bearing in mind what I said at the beginning of my speech—that this debate is about the future system that should be adopted for servicing the Royal Navy which plays such an important part in the defence of this country.

My hon. Friend the Minister of State outlined the changes to the Government's proposals after the publication of the consultative document. Operating companies are to be established which will enter into contracts with contractors for a period of seven years. At the end of the seven-year period there will again be uncertainty. I want to put to my hon. Friend the Minister of State a question that increasingly is being asked. He was not over-optimistic when he referred to the number of potential contractors who may be in the pipeline for the Devonport contract. One of the bases upon which he presents his argument for a fundamental change in the administration of the royal dockyards is that a more competitive edge will be introduced which will result in the dockyards being more cost-effective and providing a better quality of service. If, however, no contractor comes forward, or if the terms are unacceptable to either side because of the uncertainty, we are entitled to ask what will happen.

The Bill contains what I interpret as a fall-back clause if unforeseen circumstances should arise. I do not regard the reference to a Government-owned company as a permanent option. It is an interim measure. If we were obliged to introduce it, it would lead to greater uncertainty over an extended period. All of those who are concerned about the defence of this country, the future of Devonport dockyard and the impact of these measures upon the local economy are entitled to a response from the Government.

The separation of the management and work force will destroy the entity of the dockyards. I have already referred to the fact that there has been an increase in uncertainty. Those who are employed in the dockyards will feel less certain about their future. This in turn will lead to a reduction in the ability of the work force. In other words, their worries will be manifested in the work that they do.

Almost 13,500 people are employed at Devonport dockyard. We know that during the next 18 months to two years that number will be reduced by about 2,000. Devonport is one of the five largest single-site operations in the United Kingdom. It should not be forgotten that, in addition to the 13,500 employees in the dockyard, at an adjacent site almost 5,000 additional people are always employed by the Royal Navy base. Therefore, the total Devonport presence is almost 19,000.

I am worried about the economic and social implications of the Bill for Plymouth and south-east Cornwall. I have deliberately refrained from concentrating on local aspects, important though they undoubtedly are. However, I wish briefly to remind the House that the area of south-east Cornwall that I represent already has 18 per cent. unemployment, it already has assisted area status and average earnings are 18 per cent. below the national average. Therefore, the House will understand why I and the great majority of my constituents could do without any further traumatic experiences in the near future.

Mr. Stuart Randall (Kingston upon Hull, West)

Which way will the hon. Gentleman vote?

Mr. Hicks

When the hon. Gentleman has been here a little longer, he will not make such inane comments.

I return to my central theme, which is the defence and security of this country. In particular, we are considering the servicing of the Royal Navy, and that is an important ingredient. We are being asked to agree to what I have previously described in the House as a speculative, non-proven system. There is no comparable economic model anywhere in the world. The arguments deployed by the Secretary of State and his Ministers in support of the proposal are unsubstantiated. There is a total absence of clear, tangible evidence—

Mr. Maxwell-Hyslop

And the total absence of the Secretary of State.

Mr. Hicks

My hon. Friend is right.

In the absence of any known arrangements that could win the confidence of the work force and provide the required managerial expertise, I am not prepared, at this stage, to risk the defence of our nation for dubious financial savings. I shall vote accordingly.

6.13 pm
Mr. Dick Douglas (Dunfermline, West)

I and my colleagues serving on the Select Committee on Defence have laboured long, but not too wearily, with the contents of the Bill. I do not want to weary the House with the chronology of the background to the Bill. Those points have been made well by my right hon. Friend the Member for Llanelli (Mr. Davies) and by the right hon. Member for Plymouth, Devonport (Dr. Owen). Suffice it to say—and in the absence of the Chairman of the Select Committee at this point—that there was a brief interchange between the Chairman and my right hon. Friend about the Committee's conclusions.

There is often some dispute about the conclusions that a Select Committee may reach, especially when it has a preponderance of Government Members. However, I challenge anyone who heard the evidence given to the Select Committee on Defence—as I did—to do other than conclude that the evidence was overwhelmingly against the Government's preferred option.

On the first occasion that it considered the matter, the Select Committee made it abundantly clear that the Government had failed to prove their case. On the second occasion, perhaps wrongly, I exchanged views with Vice Admiral Tippet, who, quite rightly, corrected me. I wrongly suggested—sometimes I get it wrong: The evidence that you gave not only to this Committee but to the Public Accounts Committee, Admiral Tippet, enabled the Chairman of the Public Accounts Committee to say on the Floor of the House that it was the worst evidence he had ever received. I was corrected by Vice Admiral Sir Anthony Tippet, who said, "The weakest, I think." It was the weakest evidence the PAC had ever received on statistics, finance and the cost-effectiveness of the Government's proposals.

I cannot do other than reach the conclusion that the Government are proposing this measure for reasons other than a saving to the public purse. I believe that the Secretary of State—and I regret his absence—thinks that he is a manager, that he can embark upon a Tory-sponsored managerial revolution, that he is a good boy and is gaining Brownie points with the Prime Minister. One way to gain his points was, of course, by his proposals for the ROFs, and another is this proposal for the dockyards.

The right hon. Gentleman looked around and found an adviser, Mr. Peter Levene. We know something about Mr. Levene's background. He went into the dockyards for a few days and produced a tardy, four or five-page document. He told the Secretary of State that, having examined the position, he thought it would be a great idea to have some form of commercial management, splitting the assets of the dockyards from the labour force.

I come now to the kernel of my argument. This is almost the first time in contemporary industrial history that we have made wage slaves of a labour force. I ask the Minister, who has some experience of shipyard working, whether this is not the first time that we are transferring, not capital assets, but a labour force into a contracting company, whose only asset will be that labour force—the employees and the project management group.

I know that the Minister is relatively new to this area, but he has civil servants ready to assist him. I ask him to name another occasion in contemporary industrial history where that has happened. We are returning to what, in Scottish terms, I call the tinned miners. In the 18th century, miners in Scotland had to wear a chain around their necks, which went along with a job in the pit. If they are subservient enough—I do not believe that they will be—the workers will wear checks round their necks to enable them to be transferred from one company to another. It is a ridiculous state of affairs in modern industry to treat the work force, the most vital asset—an asset that does not appear in any company's balance sheet—in this way.

When describing the background, the Minister said that the Secretary of State had embarked on a consultative process. The Select Committee described the way in which that was done as inept. Indeed, it was not a consultative process at all. Almost in the middle of the process documents streamed out of the Ministry of Defence explaining the position. There were 25 documents, and by now there may be more. In the middle of that so-called consultative process, the Government told the workers in the dockyards, in effect, "Make up your minds, but in the meantime we are issuing a number of reports to explain the position." The Government made a farce of the consultative process. It was not consultation at all, because the Secretary of State had a closed mind on his preferred option and intended to take the step, come hell or high water.

Let us not forget that a Select Committee of the House was in the process of deliberating. It was obliged to rush—I use the word loosely—its report to try to forestall the closing date for the consultative period. Little time remained, following the issue of the report, before the commencement of the summer recess and then the proroguing of the House, in which to examine the recommendations. Little time was available for hon. Members to examine the position before the Second Reading. Even so, having examined the matter again, we reached the view—I accept that it was not conclusive—that the Government had still not proved their case.

These are early days in the process of Select Committees. Committees of this House do not have the powers that are possessed by their counterparts in Congress. If we are to build up the reputation of our Select Committees, we must accept that they have the important function of examining evidence and presenting views to the House so that hon. Members can decide issues for themselves. We shall be doing our Select Committee system a great disservice if the Government, who have a majority on them, treat the views of Select Committees in a cavalier fashion.

What kind of Navy are we likely to have in the late 1980s and 1990s? Clearly it will be a mixed Navy of surface and sub-surface vessels. Though I may hold different views from others about the degree of mix that should exist, it is clear that, despite the difficulties of financing Trident, we shall have a Navy with a substantial surface component, along with a sub-surface component.

A prime area of the sub-surface component will be the Polaris fleet and the SSNs. We had a hint from the Minister today about how the new contracting companies would come in and learn, in operational terms, how to refit and maintain the fleet. Such expertise on the part of the contracting companies will gradually have to develop.

Perhaps I should earlier have declared my interest, in that I am a long way from direct contact with the shipbuilding industry. As a member of what was the AUE, now the AUEW, I am a long way from being a Clydeside fitter. That is why I ask the Minister, who has considerable industrial experience, if he can point to a better project management set-up anywhere in industry than prevails in the present refit and maintenance organisation of the Polaris fleet. It is the finest project management that I know.

I have examined the list of companies that are touting for Rosyth and Devonport, and there are many more touting for the former than for the latter, though I shall deal with that later. Where in the contracting companies is there commensurate expertise as exists in the dockyards today? The Minister gave the game away, because he said that to enable the contracting firms to overcome the learning curve they would have to come into the dockyards and operate in parallel with the existing managements for 18 months. What a cheek—

Mr. Norman Lamont

indicated dissent.

Mr. Douglas

I shall willingly give way to the Minister if I have misrepresented him.

Mr. Norman Lamont

I did not say that they would operate in parallel for 18 months. I shall go over this point when I reply to the debate. The 18-month period was the time, I said, before we would work up to the proportion of fixed price work that we intend should be the ultimate. That is greatly different from what the hon. Gentleman is suggesting.

Mr. Douglas

Perhaps I put an unfair gloss on the Minister's remarks. The Minister is saying that the contract will be on a fixed price basis, but that initially it will not be for all of the 70 per cent. of the refit and maintenance of the fleet that now goes to the dockyards. There will, therefore, be a learning curve, however loosely one might describe it as such, and in that period the contracting companies will have to rely on the weight of expertise that now exists in the dockyards.

I repeat my question: where in any of the 11 contracting companies, which I shall not embarrass by naming, is there a corporate management equivalent to, let alone in excess of, that which exists in the dockyards now, particularly in the refit and maintenance of the Polaris fleet? I am sure of my ground, because that is the most prized corporate management in refit and maintenance work in ship repairing in the United Kingdom, and probably in the world.

What markets are we considering? About 80 per cent. of the ship repairing market in the United Kingdom is in the dockyards, and that work is now being touted for by the contracting companies. I agree with the right hon. Member for Devonport that some companies will probably tout for the yards so as to curry favour with the Ministery of Defence, and particularly with the new chief of defence procurement. The real prize will be that loading of Rosyth and Devonport in relation to nuclear refits. Those are extremely complicated refits, the expertise for which now resides in the dockyards.

The Secretary of State has a strategy that bemuses the House and relates to his view as a manager. I apologise for using the name of the Secretary of State when he is not here, but let us suppose that, as a good manager, he put his views with regard to the contracting arrangement to the labour force or to a Select Committee and was told that his case was not proven and was extremely dubious on managerial grounds. Surely a good manager would want to cry "Halt", to think again and to reach some other accommodation, but the Secretary of State has not done that.

The Secretary of State has not proved his case. Only Mr. John Garnett of the Industrial Society supported the Secretary of State's case before the Select Committee, and it was pretty poor evidence. Does the Secretary of State justify his case in terms of servicing the fleet? Perhaps in the past the arrangements have been too cosy, but no one can point to that arrangement as being to the detriment of the fighting efficiency of the fleet. If the end is not profitability but the fighting efficiency of the fleet, there is no justification whatever for the Government's case.

What will contracting companies do in bidding for fixed price contracts? Will they bid for them at the lower end of the fixed price? Certainly not. They will bid at prices that will reflect the difficulties of the refit process and their view of profitability. There is the concept of fixed price contacts plus the problem of emergent work. It has been suggested that there will be a considerable gain in expertise and in the accurate pricing and costing of refits, particularly in emergent work. At present, the Navy is good at pricing 60 per cent. of a particular refit, because 40 per cent. of the price may be related to emergent work, but we have not grappled with the fact that contracting companies, in dealing with fixed price contracts, will price at the higher end of the scale. Even if they did the opposite, one can imagine what the situation would be after they got the work in the yard.

There might be a frigate at Rosyth or Devonport. Two thirds of the way through the refit the contractor might say that there was much more emergent work than had been anticipated in the budget. Would the Navy have to wait until the matter had been argued across the table? Would the Secretary of State come to the House and say, "I am sorry, but we cannot have the strategic nuclear deterrent now because we are negotiating with Taylor Woodrow"? Is that what is suggested? Alternatively, are we capable of devising contractual arrangements that are so firm and so fixed that no such situation can emerge?

The proposal in the Bill is a leap in the dark, not only in relation to the labour force—I have stressed the importance of that—but in relation to the reliability of the fleet as a whole. I repeat that perhaps in the past there has been too cosy a relationship—that is debatable—but it has never been to the detriment of the fighting efficiency of the fleet.

Mr. Tony Marlow (Northampton, North)

The hon. Gentleman is saying that perhaps there has been too cosy a relationship. I deduced from that that he feels that the operations may not have been as efficient as they might have been. If so, what has been done has been too expensive and too extravagant. There is a limit to the amount of money that can be spent in any area of the Government provision, including defence. If there has been too much expenditure in the area that we are debating, could not that money have been spent in other areas, to improve the efficiency of the Navy and the services in other ways?

Mr. Douglas

When there is an excess of £400 million, there is bound to be room for improvement in efficiency. Nowhere in their evidence to the Select Committee did the trade unions deny the possibility of achieving greater efficiency. Indeed, the trade unions were only too anxious to achieve greater efficiency, and argued the case for a trading fund, which would give the Government the accountancy constraints and innovations that perhaps are desirable to achieve some of the aims that the hon. Member for Northampton, North (Mr. Marlow) might desire.

I do not wholly support the idea of a trading fund. As the Select Committee pointed out, the savings as between the Government preferred option and the trading fund option are minuscule, and we have had no detailed estimates of those savings from accountants. The right hon. Member for Devonport and the trade unions suggested that there was a case for a detailed analysis of the trading fund option, as did the Select Committee on Defence.

The Government's view is that it is essential to transfer 19,000 people from Civil Service employment into some sort of contracting or operating company. There we have a distinction without a difference. When the right hon. Member for Devonport was speaking, the Minister of State, in an intervention, said that there would be no possibility of having two or more companies within the one dockyard. I hope that I have not paraphrased him wrongly.

The Bill enables the Government to do almost anything with the dockyards. Let no one in any part of the House be under any illusion. I am sorry that the hon. Member for Plymouth, Drake (Miss Fookes) is not here. Is an operating company, as a sort of halfway house, suggested to persuade some reluctant Conservative Back Benchers to support the Bill, so that everything in the garden will be lovely?

The Secretary of State, as the sole shareholder, will hold that share in the public interest. The only difference is that the employees will cease to be civil servants. Unfortunately, the Secretary of State will be at arm's length from his Ministry and will be able, at will, to bring contractors into the yards to do his bidding. I suggest to my trade union colleagues that it will be very difficult for the lads in the yard to oppose it. It will be highly destructive and will put their future in jeopardy, as the Select Committee suggested. Therefore, it is not a convenient halfway house, although it might persuade some reluctant Conservative Back Benchers.

My hon. Friend the Member for Dunfermline, East (Mr. Brown), other Fife Members and myself respect the contribution that Rosyth dockyard has made to local employment, particularly the employment of apprentices. There is no indication whatever that any of the contractors would give to apprentices the training and background that the dockyards have given them. Other dockyards might have done something in social terms, such as more training than was needed, but that is a vital and important contribution to the labour force, not only in the east of Scotland, but in Scotland as a whole.

The Secretary of State, for doctrinaire reasons, has become unpatriotic. The Conservative party is usually depicted as the party safeguarding the defence of the nation. We have had some strictures from the Minister over the Trident force, and I shall be happy to deal with them on another occasion. (Interruption.] The Minister should not tempt me. I shall deal with them on another occasion. The Secretary of State has placed the fighting efficiency of the fleet in jeopardy. He has undermined the morale of the most vital asset—the labour force. I understand why the Secretary of State is not here—he should be ashamed of himself for introducing the Bill. I ask my hon. Friends, and anybody with sense on the Government Benches, to vote against the proposals.

6.41 pm
Mr. Bill Walker (Tayside, North)

I share the concern of the hon. Member for Dunfermline, West (Mr. Douglas) because Rosyth is a vital part of the Scottish economy. The people who work there have shown loyalty to the country and to the Royal Navy for a long time.

Against that background, one may wonder why we are debating the subject. If loyalty were the only ingredient that mattered, we should not be having the debate. There is more to it than that. As the decades have passed, certainly since the second world war, the costs of maintaining modern equipment, particularly modern submarines, have escalated to the point where the defence budget in that area, and in others, is now under considerable stress. If we had unlimited resources and were able to keep voting extra funds, there would be no problem.

I find the argument for the protection of jobs in the defence industry rather interesting coming from the Opposition Benches. Every time we have a debate on defence, the Opposition want to cut expenditure. It makes one wonder how they will achieve those marvellous cuts and still maintain the work force and the efficiency that has been sustained at an acceptably cost-effective level for some time.

It is equally true that in the past 15 to 20 years there have been enormous pressures. There have been many different inquiries and reviews into the cost of maintaining our royal dockyards. They came about not simply because people felt that we should conduct reviews but because it was glaringly obvious that more changes were required in the way in which we manage our dockyards.

Mr. O'Neill

Had the hon. Gentleman been present at the beginning of the Minister's speech, he would have heard him say, with the greatest diffidence, that there was no guarantee of any substantial impact on the defence budget from the proposals in the Bill. Somewhere around 5 per cent. was as much as he could offer, and that was with a £400 million turnover in the dockyards.

Mr. Walker

That was an interesting intervention. It is typical of what one would expect from that source. We are indulging in the exercise—

Mr. Gordon Brown

"Indulging" is the right word.

Mr. Walker

It is an appropriate word.

We are indulging in the exercise because the forward projections show—the hon. Member for Dunfermline, West put his finger on it—that if the costs of emerging technology and in other areas continue to escalate as they have in the past, the defence budget will be unable to sustain the servicing that is essential if we are to maintain a viable fleet. The defence budget is the budget that the Opposition are always proposing to trim and cut. I agree with the hon. Member for Dunfermline, West that it is important—in fact, vital—that we maintain a fleet that is capable of conducting the exercises that we demand of it.

In the past, the Navy has had to face this problem on more than one occasion. The defence policies of Governments, particularly Labour Governments, have imposed on it a task that it could not adequately undertake because it was inadequately equipped.

Listening to the Opposition, I find it fascinating that the Labour party's defence policy is non-nuclear. Anyone who has been to Rosyth knows that the special expertise that has been built up and developed there over a long period is in nuclear-powered submarines and submarines equipped to fire nuclear missiles—Polaris submarines. I do not know how the Opposition can guarantee jobs at Rosyth, where the workers have a great skill. I believe that it is a great skill, and like other skills it is of use only if it is adequately and effectively managed. How can those people continue to look forward to job security when the Opposition's defence policy will phase out the jobs?

The major difference between the Opposition's defence policy and the Government's is that the Government's is based on guaranteeing the jobs at Rosyth. Trident guarantees many jobs, and no one should underestimate the value of re-equipping the Polaris fleet and the length of time that that will guarantee jobs at Rosyth. As long as the Trident submarine is in service, there will be a demand for it to be serviced at Rosyth. Linked to that are the jobs at Coulport. They also depend on the continuance of our independent nuclear deterrent.

The Labour party wants to get rid of nuclear weapons in the United Kingdom. Labour Members are happy to discuss the details of jobs, emerging technology and what they describe as top secret work and equipment, but they will not argue about the specifics. What will the people of Rosyth do in the future if a non-nuclear defence policy is introduced? There is no question but that the savings that the Opposition claim will be made embrace the people at Rosyth who work on the Polaris refitting programme. The SSNs are also serviced at Rosyth. What will happen to them under a non-nuclear programme? Obviously, they will not be carrying nuclear warheads. They will not be equipped with depth charges that are nuclear detonated. They will have conventional equipment. The Royal Navy will be trying to sink deep-running submarines without the equipment to do it. That is what we are hearing from the Opposition. It is up to them to tell us how they can guarantee the jobs. No one can guarantee the jobs if we phase out the equipment that has to be serviced.

I now come to the SDP's defence policy.

Mr. Douglas

Deal with the Bill.

Mr. Walker

I am dealing with the Bill.

Mr. Douglas

Tell us about it.

Mr. Walker

We are dealing with the reasons for the management structure under the expected expenses and anticipating the expenses only because we have the equipment at Rosyth, which has to be serviced. Unless we have the equipment, we shall not need Rosyth dockyard, and no changes in the management structure will be required.

I have never been able to work out how the Social Democractic and Liberal parties manage to live together. The SDP's policy is for keeping Polaris until it becomes ancient and decrepit. Under the SDP's programme, Polaris submarines will continue to be serviced at Rosyth. According to that party's calculations, it seems that the submarines will require more frequent servicing. Perhaps that is one of the short-term advantages of that policy. SDP Members want to sustain and maintain an aging fleet of submarines. Anyone who knows anything about the aging submarine will know that it requires more frequent attention to its hull and structure. Under the SDP's policy, therefore, there might be a need to make some changes in the management in the short term at least, but in the long term, if the Polaris fleet is to be phased out when it is impossible to sustain and operate it, the jobs will disappear at Rosyth.

The Liberals' policy is akin to that of the Labour party, and makes this debate on how to manage the dockyards academic. If their policy were introduced, the dockyard force would not be required on such a scale, and the management changes would not be required.

We maintain the work force at a certain level so that we can sustain our fleet at sea, and that level is based on calculations of the number of submarines, whether Polaris, Trident or SSNs, projected for present operations and future purchase. It is against that background that we must examine Rosyth. Much of the waffle from Opposition Members both inside and outside the Chamber has been brought about by the fact that they find themselves under threat because the work force at Rosyth, like those in many other places, has trade unions that support the Labour party. It is an interesting thought that the people who support the Labour party may be putting their own jobs at risk because, unless there are submarines to service in future, there will be no jobs.

We have to consider the management of the dockyards because the management controls the way in which work is done and is usually responsible for its cost. The hon. Member for Dunfermline, West said that perhaps it was too cosy an arrangement. That was a lovely way of saying that they were all old boys working together, who did not control or manage as they could or should have done. If I am wrong about what the hon. Gentleman said, perhaps he will tell me. I should like to know what "too cosy an arrangement" is.

Mr. Douglas

The hon. Gentleman should make his own speech.

Mr. Walker

Perhaps the hon. Gentleman was suggesting that, because of the way in which the dockyards were managed, the Navy, the customer, was unable to get out of the dockyards what it required.

That being so, one has to ask why the Government have gone for the option that they have chosen. I had some doubts about whether it was the best of the options. The proposals put forward by the trade unions in the trading fund option were interesting. In other circumstances, we might have considered it preferable. We are concerned about the costs over the next 10 to 15 years.

In the House we often hear from Opposition Members about the cost of Trident and what it will do to the defence budget. There is no question that, while Trident is being introduced and while we are maintaining our Polaris fleet and SSNs, we must have the most effective, cost-effective system. It could be said that the trading fund would have given that to a great extent. but the question that we have to ask ourselves is whether that would have removed the "too cosy an arrangement" that the hon. Member for Dunfermline, West talked about. We should be leaving the control and management in the hands of the present people. The trading fund gave more clearly defined areas of responsibility and costs, which must be of tremendous value.

No one can deny that the Government's proposals are different. I have no doubt that it will be argued that they are novel and untried. That cannot be disputed, but the same can be said about entering into any new area of management or technology. When we first had nuclear-powered submarines, they were novel and untried. There was a learning curve when those submarines were first brought into service, both in their operation and servicing.

Mr. Marlow

The Government have embarked on a large programme of privatisation. My hon. Friend will be aware that recently British Telecom was privatised, or given back to the people, and in that way a new structure was established. That was a new and untried structure, and it included the Office of Telecommunications. Despite what the Opposition said all along, it has been very successful, and the new and untried structure that the Government put forward is now massively liked by the people and much appreciated. This is another such example.

Mr. Walker

My hon. Friend is right. He is moving into an area to which I was about to refer. With novel and untried things, there is bound to be criticism. We must expect a feeling of uncertainty and insecurity, particularly in the work force. It would be remarkable if the workers did not now feel insecure. Of course, they do, and not unnaturally so because they believe much of the current scaremongering.

Let us consider the evidence in industries which have been privatised. The nearest example is British Aerospace, which was privatised by the Government despite all the fears, qualms and stories from Opposition Members about the ghastly things that would occur. They kept talking about top secret work and wondered how secrecy would be maintained if British Aerospace was privatised. They asked how that could be done in a privatised company. Anyone who has made any attempt to study those matters knows that private British companies have always been involved in defence procurement for top security work. Some of them have developed new equipment, often ahead of the demands of the services. The prime example was the Spitfire, which was developed privately and became the front-line service fighter of the Royal Air Force.

Even today British Aerospace is not showing any of the dreadful signs and symptoms of trouble which Opposition Members predicted during our debates on its privatisation. Experience shows that the trade unions at British Aerospace are some of the most effective and efficient in the country. Indeed, they are an example to many of us. They come to the House and lobby on behalf of their company for orders and greater efficiency. They demand that their company is the most efficient and profitable. They are quite different from people who lobby simply to maintain numbers of jobs. They are both different and progressive.

I welcome the many visits from the trade unions of British Aerospace. They tell us what the Government should be doing. The European fighter aircraft is a good example of how the trade unions developed an attitude early on. They decided that the project should be not French based but based on the experimental aircraft which British Aerospace was constructing. Privatisation, at least in the form introduced into British Aerospace, has undoubtedly been successful. It works, and the work force responds to it.

I now turn to the complaints about top secret work. Opposition spokesmen often say, "The Government propose to put Britain's ultimate deterrent"—the nuclear deterrent force, including the Polaris submarine force, which is later to be replaced by Trident—"into the hands of private contractors." Indeed, that would be foolish if it were to put the nation's security at risk, but what evidence is there of greater risks if one privatises areas of top security, instead of retaining them all in the public sector?

Most high technology areas are already in the private sector, and certainly all avionics are. Who can deny that British avionics are the best in the world? It is a great tragedy that we do not tell people more often how we have maintained top security and kept out both enemy agents and agents of industrial espionage interested to find out how our top security avionics work, are manufactured, constructed, maintained and serviced. Most of our avionics companies—for example, Ferranti, GEC, and Marconi—are world leaders. The British head-up display and the laser gun sight are way ahead of the equipment of anyone else. No one has yet suggested that, because they are in private hands or they are returned to the manufacturing factories for servicing, they are a security risk.

In the days when the Vulcan bomber was our deterrent force, the Vulcans were serviced partly by the Royal Air Force at maintenance units, and partly by the manufacturer. There was no risk. Where, then, do Opposition Members find evidence that placing the servicing of our nuclear submarines in the hands of private contractors will put the nation's security at risk?

Mr. Gordon Brown

If the hon. Gentleman is so sure that there is no problem with top secret and classified information, and with the policing of the Official Secrets Act 1911, why is a Ministry of Defence committee sitting on the issue at present, as part of the 19 working parties which are considering how to manage the scheme? Is it not a tribute to the sad state of the Scottish Conservative party that the first Back-Bench Member to speak in favour of the proposal is the newly elected—incidentally, by English votes—Scottish chairman of the Conservative party? When will he fight for jobs in Scotland, particularly as Rosyth, with 8,000 jobs, is the largest industrial establishment at risk under the Government's policies?

Mr. Walker

I might have expected some such nonsense from that source. If the hon. Gentleman had made any attempt to study the facts, he would know that I am the second Conservative chairman to be elected under the system of which he complains. I objected when I was the losing candidate, but nothing was done about it. Within 30 minutes of my election, I went to see the chairman of the 1922 Committee and asked to have the rules changed.

I am not worried about the background. Indeed, I care as deeply about the jobs at Rosyth as the hon. Gentleman does. If he had bothered to do any homework, he would know that there is a naval workshop in my constituency. I am anxious that we maintain these operations in Scotland, and the best way to do it is to ensure that the customer—the Royal Navy—has the funds to purchase the equipment of the future. That is why I support Trident. It does more for job security at Rosyth than almost any other single project. For the hon. Gentleman to shake his head and to tell the Rosyth work force that the cancellation of the Trident programme will not put their jobs at risk is to live in a world of make believe.

All the experience shows that when programmes are cancelled, servicing jobs are put at risk. That always happens. The hon. Gentleman suggests that he cares about jobs, but I want to protect jobs and ensure that high technology remains in Scotland. I do not want the jobs and experience to disappear, which will happen if a future Labour Government cancel programmes. [HoN. MEMBERS: "What about Gartcosh?"] Gartcosh is not about emerging technology or the future, but about the present. I am talking about the future. We should consider carefully how to maximise our opportunities.

I agree with the hon. Member for Dunfermline, West that the Rosyth work force has skills and talents that we should not put in jeopardy, and if I believed that any provision in the Bill would put at risk the future of the dockyards, there is no way that I would support it. The finest way to secure jobs at Rosyth is to ensure that we have a programme for the future that supplies the work force with the sort of equipment that it is good at servicing—nuclear-powered submarines which carry nuclear missiles.

I cannot follow the logic in the argument that somehow one can cancel programmes but still provide work, and that is where I differ from the Opposition. We must reassure the work force that it is not being misled. As a Government, we have a responsibility to carry the work force with us when we introduce measures such as this. It is not enough simply to deliver grand speeches in the House of Commons or make statements on television. It is essential to go into the dockyards and explain clearly what the proposals mean and how they will be operated once they come into force.

If we are to take workers along with us, particularly in periods of great uncertainty, it is essential that any areas of doubt are examined together. It is also important, when introducing a programme of franchising out the management, to ensure that those who take over operate under conditions that preserve the skills, talents and morale to which the hon. Member for Dunfermline, West referred. I apologise if the hon. Gentleman thinks that I am damaging his case, but as we are both concerned about jobs it is inevitable that we should touch on the same topics, including morale, and one of the surest ways of destroying morale is not to explain clearly what one is proposing.

Mr. Randall

Is the hon. Gentleman aware that the hon. Member for Plymouth, Drake (Miss Fookes) felt that the consultations were not satisfactory and that the dockyard workers felt that the consultations were a mere pretence?

Mr. Walker

I cannot accept that. I cannot accept a situation in which consultations are a farce. We must go through a process of consultation on all the areas of uncertainty, and they must not be a farce. I accept that for whatever reason some individuals will want to object, but if evidence is available of the need to improve the consultative process, it should be produced. Now is the time for that to be done. After all, this is only the Second Reading stage. Now and in Committee are the best times to press any Government to consider changes if we think that their legislation contains areas of uncertainty.

It has been said that the 2,000 job losses at Devonport and 400 at Rosyth are incorrect. Fife regional council has suggested that there will be greater redundancies, but the onus is on it to present us with the facts that substantiate that claim.

I have a high regard for the work done at Rosyth, although it is true that in some instances the servicing of submarines has been late and that the Royal Navy has been unhappy. On occasions, naval officers in my constituency have complained that they have had to put right problems that should not have arisen.

If the same number of frigates and submarines are available for servicing, does that mean that Fife regional council envisages the same work load being done by 2,000 fewer people? That is not sensible. If that is not what the council means, it can only be suggesting that somehow Rosyth will have a diminishing work load.

If that is so, we must be clear about what it means. I understand that in future the royal dockyards will be required to satisfy the Navy that it is getting good value for money in terms of the work that is done. There is to be no change in the number of ships, and certainly not in the number of submarines, that will require servicing. Indeed, an increased number of submarines will require servicing, because there will be more hunter-killer submarines, not fewer. Given Rosyth's special expertise, I would have thought that it could look forward to more work.

If the Navy has more ships for servicing and Rosyth is the obvious place at which to carry it out, from where will the redundancies come? Will they be achieved by increased efficiency? I doubt that very much, because no one will convince me that the present Rosyth work force is overmanned to the tune of 2,000. That is nonsense, and anyone making such a statement will be laughed all around Fife, because it is just not true.

We are talking about improvements in management that will produce better and more cost-effective work. That is not the same as reducing numbers. If the ships are serviced more speedily, if the job is done more effectively and if there are more submarines to service, a far better cost ratio per unit will be achieved.

Frankly, I think that Fife regional council picked the figure of 2,000 out of the sky. I am still waiting for the council to substantiate how those 2,000 redundancies will occur. If it is saying that in future a Labour Government will run Rosyth, I can certainly envisage 2,000 redundancies because, without a Polaris or Trident programme, there will be fewer important ships to service.

To my mind, the council's claim is not about the way the dockyards are managed but about how the Royal Navy will in future be able to give the dockyards the same number of ships for servicing as it has done in the past.

I am concerned about the jobs at Rosyth and the effect that they have on the Scottish economy. Given the situation that will prevail in the next 10 to 15 years, it is vital that we have in place the new training that will be required and the new practices that will be necessary to service future equipment. If we are to have the willingness and attitudes that are vital for the dockyards to be cost-effective, the new management must be monitored at each stage so that we know that it is producing what the Bill envisages.

I know that some of my hon. Friends are not too happy about this measure. If we are not satisfied that the proposed way of managing the Royal dockyards is the best way, my hon. Friends have a duty to spell out their doubts clearly in Committee on each clause and each amendment, and each argument must be answered in detail. I assume that the Bill will go through unamended. Unless my hon. Friends' reservations about the proposals have been satisfied, there is a danger that we shall put into operation a package of proposals that will not carry the convictions of hon. Members in whose constituencies the dockyard workers live. My hon. Friends have a special responsibility. We must think seriously about trying to win the hearts and minds of those who are deeply worried about what will happen as a result of the Bill.


Mr. Michael Foot (Blaenau Gwent)

I thought for one moment during the speech of the hon. Member for Tayside, North (Mr. Walker) that the Government had been able to disinter a supporter, but in his last few remarks that support became frayed. He finished by delivering as menacing a threat to the Government as he is ever likely to deliver. I can see the Government trembling.

I should like to return to the point that I made at the beginning of the debate about the Secretary of State's absence. I say that with no disrespect to the Minister who introduced the Bill. The Secretary of State's absence is not a small matter. It would have been open to the Minister to insist that he should have been here and to insist to the Leader of the House that arrangements should have been made for the Bill to be introduced when the Secretary of State was not absent from the country on other duties. The doctrine in these matters is that a Minister's first responsibility is to the House of Commons. It does not appear that that responsibility has been discharged by the Secretary of State. I have had no answer to the question whether the Government attempted to change the timing of this debate so that the Secretary of State could be here.

This is a controversial Bill. If it were a trivial, tuppenny-ha'penny Bill, the Ministry of Defence might be able to say that it could be left to Ministers other than the Secretary of State. It is plain from what has been said that hon. Members on both sides of the House are aware that the Bill involves a major principle. It involves the future, the status, the work and the prospects of many of our citizens—people who have given great service to the nation. Their livelihoods are at stake, as the hon. Member for Plymouth, Drake (Miss Fookes) underlined. In such circumstances, for the Secretary of State for Defence to say that he will not trouble to come here or make arrangements to be here is an insult to the dockyard workers, the industry and the House of Commons. It also injures the way in which we seek to do our business.

No hon. Member who has listened to the debate could doubt how powerful are the objections from both sides of the House to what the Government propose. The hon. Member for Drake made that clear, but it was not just her speech. Many other speeches have been made which have mentioned the same point. Every speech, except that of the hon. Member for Tayside, North, has been extremely damaging. Every speech has had to finish with a plea to the Government. Even the hon. Gentleman, their one supporter, ended with a plea. He said that we should look at the matter afresh and have real consultations with the people who do the work.

If the Secretary of State had been here, we should have been able to press such matters upon him. The Minister has a disability. He cannot change the Bill at this stage. He has no power to respond to the debate. He cannot say that he will consider the case that has been put by hon. Members on both sides of the House. In view of what was said when the earlier statement was made, the Secretary of State's absence is an insult to the House of Commons. He will do himself a grave disservice. It is arrogant of the Secretary of State to say, "Let the House of Commons get on with its business. I shall not worry about it."

Every parliamentary opportunity has been taken to try to impress upon the Government the fears and anxieties felt by different sections of the House. That is what Select Committees are for. That is what the Public Accounts Committee is for. The Chamber has the power, the right, the authority and the duty to survey what those Committees say, but they are set up to advise us—and all the advice that has come from those Committees is opposed to what the Government propose. Never before, I suppose, in parliamentary history have there been so many Committees recommending that a Government should not do what this Government propose.

The Bill is a kind of constitutional outrage. If we were not discussing something even more serious—what the Government are doing to workers throughout the country and in the dockyards—there would be many reasons for objecting to the Bill because of the form in which it is presented. Even the excellent Library, which produces reference sheets, was dumb-founded by the Bill. In its introduction, the Library said: The interpretation of this Bill … presents one important problem. It is basically enabling legislation, not just in the sense that it enables orders to be made at a later date but also because it enables companies to be established and a particular scheme to be operated. The Library describes its difficulties in suggesting to Members how they should consider the Bill. The Library's note finishes: In the case of the Dockyards one has to remember that all assurances about conditions of staff service need to be in the Bill itself for them to have any legal validity at this stage. In other words, the Government have produced one of the vaguest enabling Bills ever presented to the House. They could do almost any thing under the Bill and claim that they were acting within the proper confines of the Bill. All they have to do is to introduce orders late at night. They are giving themselves the power in the future, late at night, to do any of the things to which all the Committees have objected whenever they have been able to examine the matter in detail.

As my hon. Friend the Member for Dunfermline, West (Mr. Douglas) has said, the Committees have spent many hours examining the proposals. By this enabling Bill, the Government are giving themselves the power to ram through at the last moment any solution that they want. They have merely to call upon their majority in the House to do that. For them to proceed with such a matter in such a way can only cause grave damage to the House of Commons.

The right hon. Member for Plymouth, Devonport (Dr. Owen) asked what we were to do when every kind of parliamentary resort had been used to bring pressure on the Government and the Government would not listen. The Government would be doing a great injury to the House if they used their majority in that way. They cannot complain about the representations made to them by the dockyard workers and the various Committees, but there has been no real consultation between the Government and these people, as the hon. Member for Plymouth, Drake has said. The hon. Lady knows the situation better than the Minister, for she has been interested in this matter from the very beginning. The hon. Member for Tayside, North, almost on bended knee, pleaded for consultation in future. The Government knew that they were doing something that was bound to cause deep offence in many quarters, but they did not bother to have any decent consultation, just as they have not bothered to listen carefully to any representations from the various Committees.

When the Secretary of State deigned to come to the House and make the original announcement about the Bill, one of his chief methods of proceeding was to sneer at hon. Members on both sides of the House who raised matters that affected their constituents. The Secretary of State turned on them, saying that they were just talking about constituency interests, as though that was in some way demeaning. He then went on to try to blame the Labour party for the situation. He said that because the Labour Government had not introduced reforms and changes at an earlier stage, this Government were now forced to make those changes. Time and again the Secretary of State has said that the Labour party ran away from such propositions. I should be happy to discuss the Labour party's record in relation to the dockyards, because it is a fine one. It is hopeless for the Government or anybody else to blame the Labour party for the state of the royal dockyards.

The royal dockyards played a pre-eminent part in the Falklands war. No Minister would dare to criticise what the dockyard workers did during the Falklands war. I vividly remember going to Devonport dockyard at that time of crisis and seeing how efficiently, indeed super-efficiently, the people there were conducting their affairs. Everyone paid the greatest tributes to the royal dockyards and the part that they played during the Falklands war. The Secretary of State, when he last deigned to speak to us on the matter, implied that the royal dockyards were being mismanaged because of the Labour party's neglect. The royal dockyards, which performed so brilliantly at the time of the Falklands war, were operating under a system of neglect for which the Secretary of State says the previous Labour Government were responsible.

It is not true that there has been shameful inefficiency in the dockyards. Nobody has said that no changes are needed. Of course, there are things that could be changed. The unions in the dockyards have always been prepared to accept that. The test of the royal dockyards is what they do at moments of great crisis, such as the Falklands war. At that moment the royal dockyards proved themselves to be super-efficient. For a dockyard to be super-efficient, it must have resources available which it may not need to use all the time. That is one of the problems.

Mr. Sayeed

No one disputes the innate patriotism of the dockyard workers, and they worked super-hard because of that patriotism. At the time of the Falklands war they did jobs in 18 weeks which were scheduled for two years, but that very scheduling shows that in peace time they were not working as efficiently as they could, so a different form of management is required to increase peace-time efficiency.

Mr. Foot

I shall answer that point by giving the hon. Member for Bristol, East (Mr. Sayeed) and the Government a history lesson. This matter has been considered before by people who have spent their whole lives in the dockyards. The trade unions and management have had to deal with the problem of pressure on the yards at special times. In war time or at times of near war and special moments of crisis, the resources must be available to do things that cannot be done on a common form basis. If that special responsibility were removed and the dockyards were run on a normal commercial basis, another Falklands crisis might occur and no royal dockyard would be able to meet the special responsibility.

The Labour party found the correct solution to that problem, and the same solution would work today. After the first world war, the numbers working in the dockyards were not maintained. People were sacked and made redundant. They were sacked quicker then than now. In 1919 almost 1,000 workers were sacked on one day, and they had to be out within a week. That is how dockyard workers were repaid for what they had done in the 1914–18 war. The workers were extremely bitter about that. That was one of the main reasons for the foundation of the Labour party in Devonport, and I am sure that the same is true of Portsmouth and Chatham. After 1918 Governments were reckless in human terms. They did not care about sustaining on a long-term basis the service that the dockyards could provide for the nation.

In 1945, after the second world war, a Labour Government had the responsibility of caring for the dockyards. The Labour party learnt from previous mistakes and would not sack dockyard workers. The Labour Government would not return to those former barbarous methods, partly because they recognised what the dockyard workers and the Navy had done in the war, but also because they did not believe that that was a sane and sensible way to run anything.

After 1945 the Labour Government managed the dockyards differently. All the clever ideas that the Minister talked about—for example, that the dockyards should find other kinds of work, which he claimed were his brilliant schemes—were merely what the Labour Government did after 1945. The Labour Government introduced repayment work. Some of the admirals at the time were not passionately fond of that, but we went ahead and managed to maintain the dockyard labour force at a good level throughout that period. We enabled the dockyards to refit other types of ship and merchant vessels and so maintain the strength of the labour force. We did not say that it was necessary to maintain the labour force at that level for all time, but if the royal dockyards have to perform the essential task of maintaining the British Navy the labour force must be maintained over a long period. It must have security, and the workers must see a future for their children, their families and their communities.

There may have been a need for further changes in the past decade. The right hon. Member for Plymouth, Devonport (Dr. Owen) said that huge sums were invested in the dockyards to enable them to do their job properly. The Opposition do not believe that that solution is perfect or that no further changes are needed but nothing could be so crass as the Government's present proposals. The Government are wrecking all that has been built up in the dockyards over this period by turning on the dockyard workers after praising them for their hard work during the Falklands campaign. The Government have forgotten how quickly the dockyard workers dealt with all their problems. I believe that Devonport royal dockyard is the most efficient naval dockyard in the world due to the way in which it has been managed and the spirit of its workers. In saying that, I do not mean to denigrate Rosyth. Rosyth, Chatham and Portsmouth also have fine records.

Under the proposed new scheme there will be great competition between Devonport and Rosyth. I am not sure how that competition will be resolved. I do not know what will happen if the new Devonport dockyard company goes, or seems likely to go, bankrupt. Will the Government let that happen or will they step in? Will it be a fake type of competition? The whole idea is monstrous. The Government should never have embarked upon it. Even after embarking on it, they should have listened to what was said in so many quarters.

The Government say that this has nothing to do with the Royal Navy—that it is just a question of commercial management. That, too, shows how little they understand. If they had gone to Devonport and Rosyth, or even to Portsmouth before they started closing it, and talked to people who had spent their lives there—dockyard workers, admiral superintendents or whatever—they would have heard a very different story.

The roots of this matter lie deep in British history. I know that it is an insult to mention history to the Government. Both history and consultation are dirty words in their dictionary. The great naval triumphs of Britain were first the triumphs of the dockyards—nationalized dockyards, although I do not wish to rub that in too much. If the Minister ever takes time to read some history, or if any member of the Government has the first beginnings of any knowledge of our history, he will discover the truth of the matter. As Trevelyan puts it, Henry VIII had founded the Royal Navy. Under Edward VI and Mary it had been permitted to decay. Under Elizabeth it was revived … Then, in a fortunate hour"— 1578, 10 years before the Armada— Elizabeth put John Hawkins in charge of the building and upkeep of her ships. During the decade before the coming of open war, which the Queen had so long and so wisely postponed, Hawkins did as great a work in the dockyards as Drake on the Pacific and Atlantic coasts. The same has happened twice in our own century. The Falklands could be regarded as a third example. On none of those occasions has anyone dared to say that the people in the royal dockyards have not served this country properly, yet the present Government care so little about all that that they will not even consult those people properly about their own future.

All this is just part of the Government's doctrine that nothing counts but the balance sheet. Governments who proceed on that basis eventually find that they cannot even run the balance sheet properly. Having begun by saying that everything must be subordinate to the balance sheet, the Government have landed us in bigger deficits than we have ever known in a whole range of areas.

An article by Raphael Samuel in The Guardian today, albeit on a different subject, touches on the Government's attitude to these matters. He says: If there is one thing which may yet sink this government … it is the way it has personally devalued us and poisoned the very idea of public service. Under the harsh glare of cost-benefit analysis, and in the shadow of micro-chip technology, it appears that the entire working population of this country—teachers, miners, engineers, even Health Service workers"— we must now add dockyard workers— are all, in some final sense, actually or potentially redundant, a drag on the nation rather than its precious human capital, as 'uneconomic' as the villages which Mr. MacGregor is consigning to oblivion. With this Bill the Government are poisoning a public service which has brought nothing but help and honour to this country. Whatever the Minister says, the best thing that he can do is to report to the absent Secretary of State for Defence, who did not have the nerve or the courtesy to come here today, that the whole House is outraged by his proposals and will fight them every inch of the way. Moreover, it will be no use carrying them through because, when Labour returns to government, we shall restore the royal dockyards to their proper place of esteem and operation.

7.44 pm
Mr. Jonathan Sayeed (Bristol, East)

In considering the future operations of the royal dockyards, five options are available. The first option is to do nothing. That is the option that the Labour Government took after the Mallabar report in 1970. No doubt they found it politically expedient to refuse to do their duty and address a problem that had existed for 300 years. The present Government do not duck their responsibilities. It is the duty of the Government to deal with difficult situations, and my right hon. Friend the Secretary of State is absolutely right to bring in a Bill which seeks to deal with the deep-seated problems of the royal dockyards.

The second option is to do next to nothing. This is the option adopted by the right hon. Member for Plymouth, Devonport (Dr. Owen) in suggesting that we set up a trading fund. Such a proposal would mean considerable upheaval, but very little gain. The work force would remain in the Civil Service, the consequent rigidities would continue and there would not be sound commercial management, because that would be impossible within such a system. The barriers to investment and the other financial constraints would not diminish and the inherent delays of the Civil Service would mean a lack of flexibility in pay, in the size and mix of the work force and in the terms and conditions under which it works. There would be no chance of profit sharing, which the Government's proposal offers, and nearly all the current problems of the dockyards would be perpetuated. The trading fund option would thus be no more than a cosmetic change.

The third option is full-scale privatisation. Personally, I am strongly against that. To allow control of a prime strategic defence asset to pass into private hands would be utterly wrong. It would confer on those private individuals considerable bargaining powers and there would be no certainty that those powers could not be exercised to the detriment of the nation. I believe that the whole House would reject that option.

Of the two remaining options, one is the private limited company option supported by my hon. Friend the Member for Plymouth, Drake (Miss Fookes). The Government would be the sole shareholder in the company. We have some experience of Government-owned companies of this kind—Austin Rover, British Airways and Rolls-Royce—but in the case of the dockyards, unlike what happened in those cases, the Government could not sell the shares, because that would lead to full-scale privatisation, which we all reject.

There are demerits in the plc suggestion. The first relates to capital expenditure. I believe that initially, at any rate, the enterprise would have to be Government funded, because finances could not be sufficiently self-generated. We would have to determine the basis of the borrowing powers of the plc. Would they be guaranteed by the Government? If the moneys came from outside, what interest rate would be charged? The plc does not offer the same inducement to make the necessary efficiencies in the dockyards. Nevertheless, it is a possibility and there may be a chance of having a hybrid arrangement, with Rosyth under commercial management, and Devonpon as a plc. Hybridity is permitted within the terms of the Bill and the plc option would always be available as a fall-back.

If the dockyards were commercialised, the majority of the fixed assets would remain in the Government's hands, but the operation of the yards would be undertaken by private contractors. The right hon. Member for Devonport decried this idea, as though it had never happened anywhere. Although I accept that there are no parallels between hotels and dockyards, it should be said that there are many systems of franchise, and not all for fast foods. Many major hotels are run on that basis. It is possible to have the fixed assets owned by one company and for another company to operate those assets. That is commercially effective. There may be no exact parallels to the franchising of dockyard management, but the right hon. Member for Devonport showed a considerable lack of understanding of how franchising works by rubbishing the concept.

The majority of the fixed assets would remain in the state's hands if there were commercial management. That is the Government's preferred option, and it is the only option in the short term that will encourage the considerable shake-up that is necessary in the dockyards, in both attitudes and demarcation. For that reason, it is my preferred option.

To make this option, or indeed the plc option, work effectively, there are certain provisions which need to be set out in the Bill, or at least in the commercial contracts. The initial—and I stress the word initial—contract period should be increased from seven to 10 years. This will include two to three years to reorganise and rationalise the operation of the dockyards and it would be fair to give the management company thereafter a seven-year run to prove how effective it is. There should be a five-year or seven-year review of operation in the initial period and the company would be put on warning if it was inefficient. After the initial 10-year period, subsequent contracts should be for seven years. It is important that the contract should be in excess of the life of a Government, of whatever party.

The second point is that the Government must take powers to act unilaterally to take back to themselves the operation of the dockyard if at any time they believe that the strategic interests of the country are being imperilled by the managing company. That right should be set out in the Bill. This should occur without a long review process. At a later date, compensation for the removal of the franchise could be agreed mutually or through an independent assessor. It is important that the Government should be able to act unilaterally if they feel that the defence of the nation is in peril.

Mr. Clive Soley (Hammersmith)

This is an interesting thesis. Does it not imply that, as strategic interests can be so important at times, the management which the hon. Gentleman is suggesting should take over the dockyards may not be up to the standards required? If that is so, why is the hon. Gentleman suggesting such an option?

Mr. Sayeed

I think that the hon. Gentleman misunderstands me. I am not suggesting that it will happen. I am suggesting that, in a belt-and-braces and string-round-the-waist Bill, we should ensure that, in such an event, we have an effective and immediate remedy.

Mr. Soley

Is the hon. Gentleman accepting the Government's thesis that the present management is not good enough?

Mr. Sayeed

I am suggesting that the whole make-up of the dockyards—I agree with what my hon. Friend the Minister said—ensures that they cannot be as efficient as we would like, or as the Navy would like. I am not saying that the chosen management companies will be inefficient. I expect them to be chosen on the basis of their efficiency. However, we still need to ensure that, if the worst came to the worst, the Government could take back into their hands the -management of the dockyards, and that the Bill, or at the very least the management contract, permits this.

I hope that the Government will encourage companies to write into their bids a scheme for encouraging profit sharing. This would encourage workers in the dockyards to play a much fuller and more involved part than mere salaried employees.

The refitting of SSNs is carried out at Devonport, though in future this will take place at Rosyth as well. The refitting of Trident SSBNs will be undertaken only at Rosyth. I accept, with certain reservations, that the Government are keeping their finger on the pulse of defence procurement and expenditure and are increasingly effective, but I am sure my hon. Friend will agree that competition is the best tool for controlling costs.

There is no inherent merit in transferring a public monopoly into a private monopoly, and I urge my hon. Friend to consider the suggestion that the parties which own the shipbuilding yards should not be the same as those who own the commercial companies that manage the royal dockyards. In that way, those who build the ships could, if equipped, compete with the royal dockyards for refitting contracts. Therefore, Vickers may well equip itself to compete with Rosyth in bidding for refitting work on SSBN Trident submarines.

Again to encourage competition I would expect my hon. Friend to ensure that the commercial management company that runs Rosyth is not the same as the commercial management company that runs Devonport because Devonport and Rosyth should be able to compete with each other. In this manner the two royal dockyards and the yards that build the ships will not only be able to compete for contracts to refit the simpler types of vessels—Royal Fleet Auxiliaries, offshore patrol vessels and the like—but will be able to compete for the refitting of complex type 22 and type 23 frigates, SSNs and even possibly SSBNs.

I regret that there has been only a short time for consultation, but I understand that my right hon. Friend the Secretary of State has not always been assisted by the trade union leaders in the dockyards. For example, they have not been prepared to distribute the booklets which have been made available. I have read some of the pamphlets which have been issued, which have suggested that pension and redundancy arrangements will be other than what they are actually to be, but the Government should have allowed a longer period for consultation. On the other hand, the Government have had the courage to address a real problem. It is a problem which everyone has acknowledged, but which only the Government have been prepared to face.

The Government have suggested that their proposed option is the one that is preferred by the Navy Board professionals who need the ships, and who operate them. The Bill is at least short enough and flexible enough to permit a variety of options to be considered. It is an important step in the right direction, and I commend it to the House.

8.3 pm

Mr. Stuart Randall (Kingston upon Hull, West)

I have no direct constituency interest in this enabling Bill, but I beg the indulgence of the House for a few minutes. I am probably unique in the House at this moment because I am an ex-dockyard apprentice. I served my apprenticeship for five years at Her Majesty's dockyard, Devonport, and joined the electricians' union at that time, which was in 1953. I am extremely proud of the training which I received. The apprenticeships that used to exist were of an extremely high quality. That can still be said of some apprenticeship schemes. The skill level of many of those who work in the dockyards is extremely high.

I am worried about this enabling Bill. We seem to be embarking on a course that will take the dockyards into some commercial management. Presumably, the motive behind that is to cut costs. It is important to remember that we are dealing with the Royal Navy. We are talking about a force which has to be in top-line condition all the time. I am fearful of some of the analogies which have been drawn today. For example, it is not possible to compare the dockyards with areas in which I have worked such as the motor industry, the steel industry, information technology or banking. Direct comparisons of that sort cannot be made.

Modern ships—whether they be surface vessels, submarines or carriers—are extremely complicated and immensely complex. It is necessary to have a skilled work force to ensure that refits, for example, are carried out expeditiously and efficiently when required. It is important to recognise also that in the event of conflict, such as the Falklands war, our work force can respond expeditiously. I fear that the Government's proposal is one that could cause a depletion of the work force. The skills that now exist in the dockyards could be lost because of the uncertainty about the terms and conditions of employment.

Under the proposed arrangements highlighted in the Bill, an employee will join one of the private companies that receive contracts. When a company has completed its contract, the individual employed on a dockyard project will be finished. That is not the way to keep together a work force which must be of an appropriately skilled level to ensure that our Navy is in tip-top fighting condition. We are talking about ensuring that one of our key services is kept in that condition.

I am worried about some of the remarks during the debate about management reorganisation in the event of a conflict. We all know only too clearly from the Falklands that the time scale is short when we are faced with a conflict. I am sure that we all remember the short time that we had to get the task force steaming south. I have no doubt that there was early intelligence, but by the time decisions had been made, we were left with only a short interval before the task force had to leave for the south. It would not be possible to reorganise management in such a short time.

One of the great strengths of dockyard employees and the management structure is that they are pretty good at sorting out complex problems quickly. When I served at Devonport, we used to hear stories and tell stories about how we could lick the Americans. When the American fleet was tied against the sea wall, our fleet was out exercising and performing various tasks that the other NATO navies were unable to do. That is of great credit to dockyard employees and the management. We must remember that wars are won by those behind the scenes as well as by those at the front line. Of paramount importance are those who ensure that our Navy is properly equipped and that our vessels are serviced to the highest possible level. Without that support, our front-line troops are seriously impaired.

I know that the people of Devonport have been loyal. I cannot speak for Rosyth because I have not had experience of it. However, my hon. Friend the Member for Clackmannan (Mr. O'Neill) will be speaking about Rosyth. The loyalty of those at Devonport has been genuine, and I do not say that in a debating sense. They have the ability to respond.

We must be careful about the readiness of the Royal Navy. It seems that we are engaged in a cost-cutting exercise, and we must not compare the Navy directly with, for example, ordinary manufacturing industry. It is clear that the Navy is a different kettle of fish.

We can test the Government's proposed reorganisation only in the event of a war. I, like many others, would be dismayed to find that in the event of a war the Royal Navy was unable to get to sea to perform in the way in which it should because of the reorganisation of the dockyards following the passing of the Bill.

This is an unfortunate measure. It is an enabling Bill and we do not really understand what it means. I share the opinion of many hon. Members that it has serious shortcomings. It seems that it will not save us very much expenditure and that any savings will be accompanied by many uncertainties. I hope that we are not penny-pinching at the expense of the efficiency and effectiveness of the Royal Navy.

8.10 pm
Mr. Neil Thorne (Ilford, South)

My colleagues who have followed the proceedings of the Select Committee on Defence will know that I believe wholeheartedly in privatisation. I place it second only to the defence of the realm.

The Select Committee on Defence went to considerable trouble and considered the Bill in great detail. After examination of the various proposals, the Committee concluded that it was not a good idea for the Bill to proceed in its present form. The Select Committee was chaired by a Conservative Member and, of course, had a Government majority. The loyalty of the members of the Select Committee was with the Government in general outlook, but they believed that matters were not being considered from the right angle. They believed that the attitude of the trade unions had changed considerably during the past Few years and that the Government's premise for promoting the Bill seemed to be based on what happened many years ago. The Government are determined to make the trade unions understand the facts of life about what works and what does not work. The hon. Member for Kingston upon Hull, West (Mr. Randall) mentioned that he joined the electricians' union, which I am glad to see is in the forefront of realism in commercial affairs because it takes a realistic line on what does and does not pay.

We must carefully consider the proposals. The Public Accounts Committee estimated that the savings likely to result would be restricted to 1 per cent. If that was the estimate before the trade unions saw the light, the margin must now be smaller. If so, are the Government considering the matter properly and effectively? I am not sure that they are.

We must consider the matter in further detail. The Select Committee concluded: We agree that the objective of infusing the Royal dockyards with entrepreneurial dynamism and a spirit of competition is a laudable one. The question is how best to achieve this end. The main benefit arising from the 'preferred option' would appear to be the transfer of 19,000 employees from the Civil Service establishment and from the constraints of Civil Service management. If that is the main objective—I understand the Government's wish to pursue their manpower targets—it is not a sufficient reason to put at risk the defence of this country.

There are many good reasons why some aspects of the defence industry should be privatised, wherever possible, but it does not follow that this is such a case. If the Government are convinced that an experiment in privatisation would work—I am one of those who doubt that—they should pursue the possibility of privatising some yards. There is no earthly reason why all the yards should be privatised at the same time. Geographically, the yards are far apart and there is a good reason for dealing with them separately. That would not achieve the 19,000 transfer objective, but the defence of the country is more important than reaching a manpower target. The Committee concluded: We urge the Government to approach the debates on the Dockyard Services Bill with an open mind and a readiness to draw fully upon the opinions expressed from all quarters, in the best interests of the fighting efficiency of the Fleet and of the defence and security of the nation. That is precisely what every hon. Member should be working for. I urge the Minister to justify how the Bill will meet those criteria.

8.15 pm
Mr. Gordon Brown (Dunfermline, East)

We are debating a proposal that destroys three centuries of dockyard service to the nation, threatens the readiness of our Navy for the task of peace and war and puts at risk the seagoing efficiency and the fighting effectiveness of 50 surface vessels and a score of submarines. The proposal has grave consequences for the future of jobs and conditions of service of a loyal work force of about 20,000 civil servants so recently and universally praised for their dedication in the Falklands campaign. When we debate these matters, the least that the House has a right to expect is not only the attendance of the Secretary of State for Defence and less filibustering from hon. Members such as the hon. Member for Tayside, North (Mr. Walker), but proper information, adequate consultation and a detailed justification, which was missing from the Minister's speech.

At best, we have had not a defence of the future arrangements for the royal dockyards but an attack on the present arrangements in the dockyards. There has been no argument in favour of the proposed management change. Instead, we have had the assertion that there should be a change in the management. The assumption that underlies every policy of this Government is that the public sector is wrong by definition and that the private sector is right because it is the private sector.

I remind the hon. Members for Bristol, East (Mr. Sayeed) and for Tayside, North, who are no longer present, that we are discussing a privatisation proposal that has been rejected by every Committee, including the Mallabar, Speed and Hudson committees, that has reviewed the future of dockyard arrangements since the war. The proposal has found no favour in any country that is faced with the responsibility of refitting, repairing and maintaining the most sophisticated naval vessels and submarines. Since its disclosure 18 months ago, the proposal has been opposed by every organisation and individual, almost without exception, that has examined it. As the hon. Member for Ilford, South (Mr. Thorne) reminded the House, since its publication, the proposal has evoked the unparalleled and unprecedented rejection of two senior Committees of the House and the outright universal opposition of the highly skilled work forces at Rosyth and Devonport. But this privatisation proposal is presented to the House almost unchanged since the original sketchy six-page prospectus was produced by Mr. Peter Levene.

The House must ask, and Conservative Members would also question if they were here, whether Britain will be better defended, more secure, safer and more efficiently defended if some of the most lethal weapons known to man are refitted by an untried operator working under untested arrangements with a work force of uncertain size over which there is as yet an unspecified amount of public control.

There is no clause or subsection in the Bill to prevent the work forces of Rosyth and Devonport from being run down to a core without any capability or capacity in an emergency. Nor is there anything in the Bill to prevent the franchises for Rosyth and Devonport from falling into the hands of a foreign cartel. There is nothing in the Bill to protect the Navy against the hazards of City and stock exchange finance, or even the coincidence of inernational crises and emergencies with awkward periods of contract changeover or inexperienced operators beginning their contracts. That is why one of the Minister's civil servants said to the Select Committee that the preferred option is the high-risk option for the Navy.

What conceivable benefits could justify the uncertainties and disruption of this privatisation measure? For six years, we have been told by the Government that the merit of privatisation is that it offers us a people's capitalism through individual share ownership and economy through competition. Yet if nothing in the Bill will achieve those objectives, if nothing in the Bill will permit mass capitalism by share ownership because no shares will be sold and only the franchise for the dockyards is on offer, if nothing in the Bill will extend real competition because with one Navy, only two dockyards and two companies in control the Ministry of Defence will inevitably be a captive buyer from private monopoly suppliers, and if nothing in the Bill will reduce the public sector borrowing requirement because all new investment in the dockyards will be the responsibility of the Government and not the private operator who takes over, we must conclude that the Bill represents privatisation for privatisation's sake, based on an unsupported assertion that the private sector is right only because it is the private sector.

The main purpose of the exercise—the only conceivable justification that the Minister could put forward for this colossal gamble with our Navy and our defences—is to cut costs and save cash. The original Levene report said that the purpose of the scheme was to save money. In the open government document issued a few months ago, entitled "The Future of the Royal Dockyard", the stated aim was the cutting of costs. In the Gracious Speech, the privatisation experiment was described clearly as being designed to secure value for money in spending on defence. Vice Admiral Tippet told the Select Committee on Defence that there would be "substantial savings" as a result of the changes.

What does "value for money" mean? What are "financial economies"? What are "substantial savings" in practice when, according to the financial statement in the Bill, the changes, are unlikely to have a major effect on central Government expenditure"? I remind Conservative Members of the point that I put to the Minister this afternoon. Even under the Government's most dubious reckonings, the minimum saving will be only £18 million, and the expected saving is only between £29 million and £33 million a year. When set against the alternative of a trading fund, which has been costed by the Government, those savings are reduced further to a minimum of only £10 million or, at best, between £21 million and £23 million. When set against the implementation costs of the scheme in redundancy payments, transitional costs and consultancy fees—we are told that implementation will cost about £60 million —the savings will be reduced by at least another £6 million a year, taken on a 10-year basis, and the savings then decrease to a minimum of £4 million, or £15 million at best. Since, in addition, up to £200 million will be paid to set up a private pension scheme, the conclusion that we must reach is that there will be no savings in 1987, no savings in 1988, no savings for the rest of the decade and that there are unlikely to be savings in the 1990s, if the scheme is properly costed, given all the additional initial expenses that are involved. There will probably be no savings even as we move into the first years of the 21st century.

It is hardly surprising that the Public Accounts Committee, concerned more with financial reality than with economic theory, was neither impressed nor convinced by the financial information produced by the Government. The PAC concluded that the evidence from the Ministry of Defence was among the worst we have received during this Parliament. The calculations given provided us with no valid bases on which to judge whether any increase in efficiency would result from the Government's preferred option. The Minister gave us new figures and new percentages on the core programme, including the costs that would be met by competition, the costs that would be met by fixed-price contracts and those that would be met by cost-plus arrangements. He appeared to say that fixed-price contracts would operate, but not for the first two years, not for 25 per cent. of the work in the next five years, not presumably for emergent work which could not easily be covered under the arrangements, and certainly not for unprogrammed work, which could not be covered under the present arrangements, and certainly not for unprogrammed work, which could not be covered under the present arrangements. Is it any wonder that when Touche Ross, the consultant to the Ministry of Defence, examined the proper financing of dockyards put into the private sector, it concluded that if it estimated what the dockyards would cost to run on a market basis, it had better include a 10 per cent. mark-up on existing prices for the profit margins that would be required by a commercial contractor? I presume that the document produced by Touche Ross is supported by the Ministry of Defence dockyard planning team, in whose name it it published.

The Government's argument is that throughout the exercise there will be substantial savings and no risk. The truth is that there will be no savings and substantial risks.

My right hon. Friend the Member for Blaenau Gwent (Mr. Foot) mentioned the Admiralty Board, which seems to be the only respectable supporter that the Minister can claim for his scheme. My right hon. Friend cited Rear Admiral George's evidence to the Select Committee on Defence, when he said: It is largely the pressures on the defence budget which have led the Admiralty Board to consider matters of saving money. The Board went even further in its evidence and said that it could see the benefit to the Navy in terms of the release of resources which should be capable of being used for front-line activities within the Navy. The board supported the proposals because the Minister told it that the scheme would produce savings. I understand that the Admiralty Board is not composed of simple sailors who might be expected to succumb to the wiles of a City operator, even one dressed for the occasion in a combat jacket. But the board has been taken in by the glossy financial prospectus passed round by the more dubious variety of secondary banks and, having been thoroughly misled by the Minister, now discovers that its puzzled assent to the scheme is about the only evidence that the Minister can cite in his favour.

If the Government cannot tell us where the scheme will produce savings, should they not tell us about the risks that it involves? In a matter so grave as national security, the House has a right to demand and to expect proper safeguards. But where are those safeguards in the Bill? Where are the safeguards to ensure the maintenance of a strategic minimum capacity? Where are the safeguards that we shall maintain an emergency capability in the dockyards at times of international crises? There is nothing in the Bill about that. Where in the Bill are the safeguards on nuclear safety, when the responsibility for radiological protection will be with the contractor who takes over the dockyard and the responsibility for the removal and transportation of nuclear waste and radioactive substances will be with the Ministry of Defence?

Where are the safeguards in the Bill to prevent our submarines from being refitted fender to fender with Russian trawlers? That is unknown in the public sector, but is clearly known in the private sector, because only a few months ago the submarine HMS Otter was photographed undergoing a refit on the Humber side by side with a Russian trawler. If there is a bar on countries that are unacceptable for strategic reasons for giving their naval refit work to the newly privatised dockyards, the dockyard planning team and Touche Ross seem to be unaware of it. Why did Touche Ross, presumably on the information given by the dockyard planning team, say in the report simply that the Communist world was "virtually certain" never to wish to negotiate the use of the dockyards? It says not that they will be banned from using the dockyards, but that they are almost certain never to wish to use them. In other words, the reason that there will not be Russian trawlers in the dockyards is not the Government's unwillingness for ideological reasons, but the unwillingness of the Soviet or Communist bloc to use the dockyards.

Why are countries that are wholly unacceptable to us, such as Chile, South Africa and Argentina, cited in the document as only "unlikely" to be wanting work done within the dockyards? Why is it said that, even though they are unlikely to want major refits in the dockyards, they may require specialist refit work to be done? Is it not amazing that the dockyards planning team has put its name to a document that says that it is possible that specialist refit work will be done on behalf of Argentina, a country with which we have no diplomatic relations, or South Africa, which has been condemned in the House and elsewhere?

Will Britain be better defended if the other countries listed require naval refit work to be done in the newly privatised dockyards, or if Chilean, Pakistani, Bangladeshi, Indonesian or Algerian frigates or sub-marines are refitted side by side with our independent nuclear deterrent at Rosyth? The Minister may say that this is not possible and that the Government will not allow it to happen, but there is nothing in the Bill to prevent such an extraordinary situation emerging and nothing in the advice that Ministers have given to the dockyards planning team to prevent it happening.

There is another even more important point that Ministers seem to have overlooked. Where are the safeguards about continued British ownership of companies awarded the franchise, which may even be trusted with the responsibility of refitting the Polaris nuclear deterrent? There are no safeguards in the legislation about foreign control of the companies that will allegedly run the royal dockyards. We cannot anticipate safeguards even in the contracts or the articles of association, for even with the proposed golden share there can be no safeguards that are finally binding on the operating company.

While a golden share may prevent Rosyth plc or Devonport plc falling into the hands of foreign shareholders, it can do nothing to prevent the company which holds the franchise—the major operating company awarded the franchise by the Government, the Balfour Beatties, the Weir groups, or the Thorn EMIs—from falling into foreign hands. Assurances from Ministers about what may happen are not enough if they are not prepared to stipulate in the legislation that the contract will be removed from any dockyard company at either Rosyth or Devonport if a certain number of shares in that company fall into foreign hands.

This is what Tory patriotism now means. In their effort, because of their enthusiasm for privatisation, to transfer the dockyards from public control to private control, Ministers are prepared to contemplate the final transfer of the dockyards from British control to foreign control. That is the end effect of the Bill's proposals, if they are not changed.

Let us consider some of the other assurances missing both from the Bill and what the Minister said today. Where are the assurances sought by my hon. Friend the Member for Dunfermline, West (Mr. Douglas) about the continuation of apprentice training for the dockyards? What possible initiative will there be for a private company working on a seven-year contract to maintain the levels of apprentice training at the dockyards that have been vital for the maintenance and development of the local economies? Where are the assurances of proper public audits of what happens in the dockyards under private control? Where are the assurances about the proper line of separation between a dockyard under private control and the naval bases under public control? As long ago as 1971, the Mallabar committee identified this as a major problem in examining any agency management scheme.

Where are the assurances about the role of dockyards under private control in the serious matters of nuclear safety and war planning? Some 18 months after Mr. Levene produced his original document, a year after the Minister said that he would be prepared to go ahead, nine months after the Admiralty Board was duped into saying that no risk was involved because it thought that there would be savings, and six months after the Government approved the privatisation and said that they would introduce legislation, none of the problems has been solved. Some 18 months after Mr. Levene reported, there are now 19 committees in the Ministry of Defence examing the fundamental issues about which we warned 18 months ago, the resolution of which is at the heart of the viability of the scheme and at the heart of whether the nation can, for security reasons, afford to go ahead.

When the Ministry of Defence committees report, the only answer that they can give is that we must simply hope and pray that international crises and emergencies such as the Falklands do not coincide with awkward periods when one contractor is being replaced by another. We must hope and pray that the crises that may arise do not coincide with an untried and inexperienced operator starting on a new contract. We must hope that the crises do not coincide with there being a competitor at the end of the term of his contract, just waiting to get out and with no reason to put his resources into doing the job.

We must also hope that the dockyards will not be held to ransom by a private monopoly supplier refitting the nuclear deterrent or any other frigates or submarines. We must hope and pray that the dockyards can quickly adjust if the City sneezes, a company goes under, a dockyard consortium collapses and at short notice we must regain public control.

Let us remind ourselves what might have happened if the enthusiasm of the Secretary of State had excited the Cabinet as early as 1979 and if the Cabinet had convinced itself of the merits of a dockyard franchise. What would have been the consequences for the Navy's unpredictable requirements in 1982 if we had been engulfed in the first changeover and if a new operator was learning by his mistakes, at our expense? What would have happened if the operator was incapable of rising to the occasion, if hundreds of men had been sacked and there was no capability to deal with emergency refits that had to be done to get the Falklands fleet to sea, or if the Navy was simply held to ransom by prices being demanded by the private supplier for unprogrammed work? What would have happened if, because of the new commercial disciplines applied to the dockyards, managers and men refused to work night and day as they did during the Falklands crisis to get the fleet to sea? Might the Navy, just because of the vagaries of the Stock Exchange, have found itself conducting the Falklands war over the debris of the bankruptcy of Rosyth plc or Devonport plc?

There are no watertight safeguards written into the Bill about the protection of our strategic defence or about our ability to respond in a crisis. There are no safeguards and guarantees because there can be none when the purpose of the exercise is to subject the dockyards, our last line of naval repair and maintenance, to the risks, uncertainties and vagaries of the market economy.

I accept that the Navy recognises that this is a problem. When it was asked in the Select Committee by my hon. Friend the Member for Dunfermline, West what guarantees there were about the refitting of our strategic nuclear deterrent in the case of emergency, the whole argument about commercial management was exploded. The Navy spokesman told us at that Committee that we were not to worry. We were told: There is no reason why the existing management at that level should change. Having decided that the existing management should be revolutionised by privatisation, the Navy now seeks to reassure us that the principal safeguard for the Navy is that the management will not change. That is a guarantee that the Navy spokesman could not give, because they are in no position to give any guarantee about the management that would be involved in the nuclear deterrent or any other project under a privatised operation. If the real safeguard for getting our frigates, submarines, destroyers and Polaris out to sea is that management will not change, what is the argument for a change in management?

During this debate, the dockyards have been subjected to some criticism, especially that levelled at them by the hon. Member for Tayside, North. When Conservative Members criticise the dockyards for their productivity they should remember that the productivity of the Devonport dockyard has, according to Navy spokesmen, increased by 17 per cent. over recent months, and that productivity at Rosyth dockyard has increased by 15 per cent. over recent months, and done so while the dockyards have remained in the public sector.

When Conservative Members seek to criticise the dockyards for their inefficiency, they would do better to look at the comparisons between the public and private sector. The hon. Member for Tayside, North seemed to forget that only a few weeks ago, in one small minor refit, Rosyth dockyard had to pick up the pieces after 28 defects were identified following the refitting of a frigate in the private sector.

When Conservative Members consider the comparison between the public and private sectors they should remember that every report since the war, while critical and asking for improvements in dockyard management, has asserted clearly that the dockyards have no rival in the private sector for cost, efficiency and ability to deliver on time.

The Government are putting forward the proposals only because they believe that the private sector is better as an act of dogma. They should remember that Rear Admiral Leach, formerly head of the fleet, not only praised the dockyard work force for what they did in the Falklands campaign but asked Ministers, in a letter in the Financial Times a few months ago, how, after all the effort that had been put into the dockyards, they could justify their being kicked in the teeth.

What has changed in the dockyards since the Speed report, the Hudson report and the Mallabar report concluded that agency management was unacceptable? What has changed since the Mallabar report concluded that agency management was the way to get the worst of both the commercial and Government Department worlds?

What has changed since the Speed report concluded that the disadvantages of agency management were that the management would have little incentive to make itself more efficient, while the usual justification for an agent was that he had the resources and skills of the parent firm to fall back on, something which would not exist when the dockyards were privatised? What has changed since that report said specifically that the contracts put out for agency management could not lead to competition and genuine incentive but would lead to confusion over who was responsible for what"? What has changed since that report said that there would be no guarantee that An agent would provide the capacity to meet urgent and unprogrammed work to maintain the operational capability of the fleet, or that the Secretary of State would retain his flexibility to move work between the royal dockyards?

What has changed since the Mallabar report, the Speed report and the various other reports? Is it the role of the dockyards that has changed? Is it the Navy's demands that have changed? Is it the sophistication of the refitting exercises that has changed? Or is it simply that the Government Front Bench has changed, given the obsessive desire of its members to pursue privatisation at any cost and to prove that anything can be privatised, including the royal dockyards?

The Secretary of State has put forward a scheme whose very basis criticises a loyal, efficient and dedicated work force. It is a work force that was not only praised for what happened in the Falklands campaign and which has not only increased productivity over the past 18 months by the figures that I have mentioned. It is a work force that has said clearly that it is prepared to consider proposals for change as long as the Minister removes the threat hanging over the dockyards under the Levene proposals. That is not a work force that is inflexible and resistant to any change, but one that is rightly resistant to the unilateral imposition of change by a Minister who is unprepared to consult, unwilling to listen and has not even bothered to have meetings with the unions in any detail over the proposals that he puts forward.

On the other side we have a Secretary of State for Defence who is not really a Secretary of State for Defence but simply a Secretary of State for the defence of the private sector. He prides himself on his patriotism but he is ready at any time to subordinate the interests of national defence to those of commercial gain. Dogma rather than evidence tells him that the dockyards have only one outstanding feature which is their principal shortcoming and that is that they are not run by the private sector. He has convinced himself that the dockyards can be put right only by applying the dogma of privatisation. Somehow he believes that what is good for Plessey, Babcock and Thorn EMI is automatically good for the British Navy, when he knows perfectly well that the first loyalty of the cartels and consortia who will take charge will be not to the fleet but to their companies' balance sheets.

There are more than 8,000 public servants at Rosyth and more than 12,000 at Devonport who have been forced by the Government's misguided policies to the front line of a privatisation war that they did not seek. They understand that the national interest is more than the sum of the private parts of the economy. Their loyalty, dedication, years of service and sense of the public interest is well known and well understood here and in Britain. Throughout the past 18 months the Minister has sought to justify the privatisation scheme by promising the Navy Board and the country that he would achieve savings. Now that that argument clearly cannot hold up after the evidence to the Select Committee on Defence and the Committee of Public Accounts, what possible justification can the Minister give us for proceeding?

Labour Members will continue to oppose what is a reckless gamble with the nation's defences and the country's jobs. We shall have the unanimous support of the work forces at Rosyth and Devonport. We believe that during the period of consultation we have gained the support of people who have hitherto been adherents of the Conservative party. We can see tonight that those Conservative Members who have bothered to study the implications of the scheme will vote against the proposals when they are put to the vote.

We believe that in Committee, when the Government are forced to face the arguments about cost and the lack of proper safeguards inherent in the Bill, they will have to change tack. At the very least, we expect the Minister to answer the questions being put to him by Labour and Conservative Members. He should tell us what capability will remain in Rosyth and Devonport dockyards to deal with an emergency. He should tell us what he proposes to do to prevent foreign control of the companies which run the dockyards and what arrangements he will make to prevent foreign naval refits being carried out side by side with refits of our frigates, submarines and nuclear deterrents. He should tell us what he means about the likelihood of jobs and apprenticeships remaining in the dockyards under the contracts that are brought into being. Above all, he should tell us the truth about the real cost of this scheme to the defence budget and to the public expenditure budget.

If the Minister of State told us the truth about his proposals for the defence of the nation and for jobs at Rosyth and Devonport, there would be not one or two but a large number of Conservative Members joining us in the No Lobby tonight. That would make it impossible for him to proceed with the Bill.

The Bill is bad for the Navy, for the work forces at Rosyth and Devonport and for the country as a whole. The Minister of State would be doing a service to the country if he withdrew his proposals.

8.50 pm
Mr. Michael Hancock (Portsmouth, South)

May I draw the attention of hon. Members to what has happened in Portsmouth. At the 1979 general election a Conservative party leaflet was headed "Defence of the Realm" and contained the simple slogan Your jobs and our dockyards are safe in our hands". There were 6,500 employees in the Portsmouth dockyard in 1979; today, there are just over 2,000. So much for the jobs in Portsmouth that were safe in the hands of a Conservative Government.

Despite the Secretary of State's answer to the hon. Member for Portsmouth, North (Mr. Griffiths) that there would be no job losses at Portsmouth, this measure to privatise the dockyards at Devonport and Rosyth will have a knock-on effect at Portsmouth. The industrial pay records will not come to Portsmouth. Consequently, the jobs that were promised have been lost and future jobs will also be lost. As 15 per cent. of the capacity of naval stores will be lost at Portsmouth, there will have to be cuts.

The Secretary of State for Defence, by his absence today, is treating the House with contempt. He is also treating the people of Rosyth and Devonport with contempt, and, to a lesser extent, the people whom I represent. He may be exploring the bolt-hole that is contained in the Bill. It is strange that the only measure before the House this Session that relates to defence contains a bolt-hole that enables the Secretary of State for Defence to get off the hook if this piece of garbage—that is the only word that can be used—is passed.

The Bill has not been thoroughly prepared. The House should have been provided with the answers to the questions that the Secretary of State has posed to his departmental heads. If there were answers to those questions, there would be no need for 19 working groups to be set up. The questions that the working groups are to explore are fundamental to this legislation. Is the Minister of State suggesting that we do not have the right to question him and get answers about the effect upon the fleet maintenance bases and upon naval manpower? Is he suggesting that the House has no right to expect answers from him on the vexed question of war planning? The Bill should not have been introduced until the Minister of State was able to answer those questions.

It is interesting that the Minister's Department put some very interesting questions to the work force. The dockyard planning team's quarterly review suggests that several questions remain unanswered. I hope that the Minister of State will be able to give us answers to those questions. The Minister's opening speech and the speeches of his right hon. and hon. Friends lead me to believe that the answers are only in the minds of the mandarins in his Department. They are certainly not in his mind.

Is the Minister able to tell the House how material will be supplied to the dockyard companies and how the refitting and repair of ships other than warships will be handled? Will the land, buildings, machinery and facilities of the naval bases be made available to commercial operators? How will naval base organisation be affected? How will the CED's current responsibilities outside the dockyard be undertaken? How will nuclear safety be assured? This point was raised by the hon. Member for Dunfermline, East (Mr. Brown). How will environmental safety be assured? How will the fleet maintenance bases be affected? How will the changes affect the conditions of service of civilian employees? What will be the effect on Royal Navy personnel? What will be the effect on war and emergency planning? How will quality assurance be maintained? How will the Royal Maritime Auxiliary Service and harbour services be provided? How will transport services be provided? What new financial and accounting systems are needed? What measures are required to maintain security? What are the future computer needs? How will design and support information be supplied? What needs to be done to maintain the protection of Government and commercial information?

Sir Antony Buck (Colchester, North)

Will the hon. Gentleman give way?

Mr. Hancock

No, I have waited too long to make this speech to be interrupted at this stage, particularly by hon. Members who have not participated in the debate.

Those questions should be made the subject of close and rigid examination. However, all that we get from the Minister of State is a smile or a smirk. That does not offer to me the kind of satisfaction—

Sir Antony Buck

Will the hon. Gentleman give way?

Mr. Hancock

No, I am not prepared to give way.

We need answers to those questions from the Minister of State. We should not have to wait until the Bill reaches its Committee stage. The mere fabric of the Bill demonstrates that the exploration of the possibilities will be very limited in Committee. Who will the Minister of State listen to if he does not listen to hon. Members? Will he assure us that the reports of the working groups will be made public to those hon. Members who deal with the Bill in Committee?

Mr. Norman Lamont

indicated dissent.

Mr. Hancock

The Minister of State shakes his head. We are not to be provided, even then, with the answers.

My right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) has made quite clear where the alliance stands on this proposition. He has the support of the whole of the alliance. My right hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), the leader of the Liberal party, has been to Rosyth and spoken to the unions. My hon. Friend the Member for Orkney and Shetland (Mr. Wallace) has also spoken to the unions at Rosyth. He has pledged the wholehearted support of the alliance in the battle to prevent this bit of nonsense becoming law.

The Public Accounts Committee's report made six valid points, to which I hope the Minister of State will be able to give answers. The Committee found that all the options discussed by defence open government document 85/01, including both commercial management and the trading fund, have not been accurately costed by the Government. Secondly, there is no clear-cut evidence to suggest that the Government's option is more efficient. The Committee could not be certain that the Government's calculations were valid. Those are real doubts on two points of finance.

The third point is whether the commercial refit comparison exercise is a prudent step—two ships being refitted in the commercial sector and two in the dockyards. I have tried repeatedly during the past couple of months, through questions to the Department, to obtain comparisons, but it appears that we will not be told how much it will cost to have ships refitted in commercial yards. We are not to be told whether that compares favourably with the costs of refitting at either Rosyth or Devonport. Yet again we are not to be given the information that we need if we are fairly to judge whether the Government's policy—

Mr. Norman Lamont

Surely the hon. Gentleman would not expect me to disclose the prices actually being charged by different companies tendering for work.

Mr. Hancock

In a recent reply to me the Minister suggested that, eventually, we might obtain the figures. Surely the appropriate time for that is when the Bill is being considered by the House so that a fair and accurate comparison can be made. Unfortunately, Conservative Members—

Sir Antony Buck

Wait for the Committee.

Mr. Hancock

The hon. and learned Gentleman might say that, but when I mentioned the possibility of obtaining those answers in Committee the Minister shook his head. There are grave doubts whether we will obtain the answers before the House debates the final stages of the Bill.

Many other points have been raised in various Committees about the fundamental mistakes being made by the Secretary of State and his colleagues, and the route down which they are leading the House and the country. Hon. Member after hon. Member has condemned the proposal. The defence of the work force has been explicit in speeches from both sides of the House. We hope that the hon. Member for Plymouth, Drake (Miss Fookes) will not just abstain tonight, but will support the Opposition parties, which are trying to expose her colleagues in the Government to the test of public opinion in her constituency. I hope that she will support those who sent her to this place by rejecting the Bill.

The arguments against the Bill are legion. The strategic fighting effectiveness of the fleet will be affected. Indeed, even the Government's handout questions whether an effective, efficient Royal Navy will emerge in the same form as it is in today. Parliamentary control and accountability will be diminished by the very act of privatisation. The dockyards will not be accountable to this place. The Government's proposal will severely test the morale of the work force and diminish what prospects it has of a future within the Civil Service.

If Conservative Members do not believe that, I urge them to draw on the experience of Portsmouth dockyard, which has been through a traumatic time. Its work force was completely sapped of morale. Some of its best craftsmen—those whom the Ministry of Defence could least afford to lose—were the first to go through the door because they were sick to death of the Government playing about with their futures. Surely the Government must learn from their mistakes at Portsmouth.

It is no good the Government adopting an ostrich-like attitude, believing that that experience cannot be repeated. I should be foolish if I were to believe that that same experience will not occur at Rosyth and Devonport. Those who care most will look for other jobs, because they do not want their jobs to be hung on a thread at the whim of a commercial contractor, or on whether that contractor has the gall or the substance to deliver the goods to the Government.

As surely as tomorrow will come, there will be doubts about the contractors. The substance of the job is so large and so complex that many of the contractors will not have the expertise required to maintain the efficient and effective work force that is so necessary if we are to maintain the defence of the realm at the level that we have come to expect.

As other hon. Members have said, the contractors can hold the Navy to ransom. My right hon. Friend the Member for Devonport said that it was not privatisation, but piratisation. Indeed, there will be land-based pirates holding the Navy to ransom. The ships will be tied at the quayside when we want them at sea.

I urge the Minister to take back to the Secretary of State the true voice of the House. It is not the response in the Lobbies of the unseen Members who have not been present today, but who will suddenly appear out of the woodwork at 10 o'clock. It is the feelings and opinions of Members who have attended the debate and who care enough about the issue to voice an opinion. The Minister must tell his right hon. Friend that when the chips are down, those who work in the dockyards at Rosyth and Devonport will respond to the country's needs—if that is put to them properly and if they are given the trust and the dignity that they deserve.

When the House met to discuss sending a task force to the Falklands, redundancy notices had been issued to the work force in Portsmouth and then withdrawn. Had those Nott cuts been introduced six months earlier, Britain could not have got that task force to the Falklands. The Hermes would not have been in a suitable condition to lead that force. Although the workers of Portsmouth had been issued with redundancy notices and had the prospect of being without jobs later, they responded magnificently, because they put the national interest first. The same can be said of the workers of Rosyth and Devonport.

It is wrong for the Government to take the action that they are contemplating in the face of such loyalty and commitment. By attempting to rub out, as it were, hundreds of years of committed work by the people of those areas, they are doing a disservice to themselves and the nation.

Apart from many hon. Members feeling that the Bill will not achieve what the Government say is their purpose, the Government must have great reservations about the measure. After all, 19 working parties would not have been established if the Government had answers to the many questions that have been posed. Those questions should have been answered long before this stage. Indeed, if the Government did not have doubts on the issue, the Secretary of State would have been here to present the Bill on Second Reading. Because of his doubts, the right hon. Gentleman did not change the date of the debate to suit his arrangements.

As my right hon. Friend the Member for Devonport pointed out, the Select Committee on Defence said: We urge the Government to approach the debate on the Dockyard Services Bill with an open mind and a readiness to draw fully upon the opinions expressed in all quarters in the best interests of the fighting efficiency of the fleet and the defence and security of the nation. In that connection, I refer again to the Conservative election leaflet in Portsmouth. It was headed: The Conservative party and its caring defence of the Realm. The Conservatives have failed the people of Portsmouth from 1979 right up to the present. Indeed, I am living proof of that, for I would not have been elected had the Conservatives lived up to their promise to save the jobs of the people in the dockyards.

I urge the Minister to express the voice of Parliament to his right hon. Friend, and by that I mean the views of hon. Members, and not simply the voting figures in Divisions in the House. We do not want pirates in our dockyards. We want dignity, loyalty and efficiency. Those qualities exist now. I fear that they will be lost if the Government's proposals go ahead.

9.8 pm

Mr. Albert McQuarrie (Banff and Buchan)

I regret that the hon. Member for Portsmouth, South (Mr. Hancock) refused to permit my hon. and learned Friend the Member for Colchester, North (Sir A. Buck) to intervene while he was speaking, because my hon. and learned Friend would have raised points of considerable importance to hon. Members on both sides of the House who will be taking part in the Committee proceedings.

It is nonsense to suggest that once the dockyards are commercialised the good workmanship and management expertise that now exist in them will be lost. I speak from experience of having taken a considerable interest in a naval dockyard which has already been commercialised.

I draw the attention of the House to the situation in the naval dockyard in Gibraltar. That was a royal naval dockyard which was closed by the Government and became a commercial dockyard. When the Government decision was made to commercialise the dockyards, it was said that the operators would be chosen for their experience in running well-managed companies.

The hon. Member for Dunfermline, East (Mr. Brown), who has left the Chamber, complained about the small number of Conservative Members present. I do not see many Labour or Liberal Members present and there is only one Member representing the SDP. The concern expressed by one or two Opposition Members is not reflected by the number of Opposition Members present. The hon. Member for Dunfermline, East, in his sensational outburst, endeavoured to create the sort of emotionalism that can be generated when such matters are discussed. Therefore, it is important to look at the precedent set by the Gibraltar dockyard.

The hon. Member for Dunfermline, East asked what would happen to the Admiralty work. The Admiralty work continues in the Gibraltar dockyard, and 14 RFAs are scheduled to be built there in the next three years, at £14 million each. Therefore, there is considerable work to be done in the dockyard.

The hon. Gentleman asked whether foreign vessels would come into the dockyard. Foreign vessels went into the Gibraltar commercial dockyard and the base is still maintained. Labour Members should not let their fears run away with them in regard to running a dockyard on a commercial basis. There is a shortage of skilled people at Gibraltar as a result of the large amount of work generated by the commercial operator. There is a rig from Brazil in the dockyard. Foreign vessels have come in from Germany, and even Russian vessels have been seen in the dockyard in Gibraltar. [Interruption.] The right hon. Member for Plymouth, Devonport (Dr. Owen) failed Gibraltar when he was Foreign Secretary, before defecting from the Labour party to the SDP.

Dr. David Owen

Speak to Sir Joshua Hassan.

Mr. McQuarrie

I speak to other people than Sir Joshua.

The hon. Member for Dunfermline, East expressed his serious concern about total control leaving the dockyard. It must not be forgotten that the commercial dockyard, once established, will be an entity. The Secretary of State will set up the companies to employ the work force at the dockyard. The ownership of the companies will be assumed by the first contractors and then by any subsequent contractors.

The hon. Gentleman said that the Bill implied criticism of the work force. I have read every line of it and I challenge any Opposition Member to show me in the Bill one criticism of the work force. The work force should be given the opportunity to study the value of commercialisation in the shipyards and the dockyards. It will then see for itself the way to achieve continuity of employment.

If there were less scaremongering and a little more effort to ensure continuity of employment, it would be much better for the people concerned. It would be better than trying to raise the tempers of people who want a safe job and future for themselves and their families.

9.14 pm
Mr. Martin J. O'Neill (Clackmannan)

Second Reading of the Bill marks a major debate on the dockyards. My right hon. Friend the Member for Blaenau Gwent (Mr. Foot) took us back to 1578 and the role of John Hawkins. As always, he enlightened many of us on the background. I do not propose to go back that far, but since 1970 there has been a succession of reports and investigations. It is perhaps not surprising that the last—and in some ways most important or significant—report is the smallest, the least respected and the most universally condemned.

As with so many matters relating to our national security and the Navy, national pride and the feeling that our fleet should get the best possible deal are always our prime concerns. Anyone who comes into contact with any of those involved, certainly in the dockyards, is left in no doubt that the loyalty, commitment and ingenuity of the dockyard work force and managers are beyond question. We have heard many tributes from both sides of the House not just to the contributions that they made to the Falklands war, but to their repeated ingenuity in dealing with difficult and often unexpected tasks.

My hon. Friend the Member for Dunfermline, East (Mr. Brown) said that there have been recorded increases in productivity of around 17 per cent. in Devonport and 15 per cent. in Rosyth, at a time when Vice Admiral Tippet is saying that there is very considerable apprehension in the work force as to the future. A measure of the commitment of the men and women in the work force is the fact that, at a time when they have been treated so shabbily by the Government, when the consultative processes have attracted the opprobrium of both sides of the House, they have been prepared to work on in the national interest to prove to the country the quality of the work that they can produce and the industry of their effort.

A four-clause Bill with an almost neutral financial effect will be, as one official said, a trivial element of the total of Government expenditure. It will be only a "trivial element", but, at the same time, the turnover of the dockyards and the work involved is about £500 million.

The privatisation will not be subject to a flotation, as with British Telecom, or put into the queue, as with British Gas or British Airways, to fund the next election campaign, although some of the firms that have shown an interest contribute considerable sums to the Tory party as distinct from the public exchequer. The Bill is not intended to widen share ownership or to turn draughtsmen, fitters, pattern makers or boiler makers into a new generation of petty capitalists. We are told that the Bill will free the dockyards from the constraints of Civil Service control and remove the work force from the Civil Service altogether. The workers will not cease to exist, but their status, as my hon. Friend the Member for Dunfermline, West (Mr. Douglas) said, will be little better than chattel slaves moving between one contractor and another.

We have heard much about the prospect of unemployment, but we have heard precious little mention from the Government of the fact that 2,000 jobs will be lost in Devonport in the near future and 400 will be lost at Rosyth. While it is assumed that the other jobs will remain, the gratitude displayed by the Government to those people means that nobody's job can be regarded as safe. The only consolation that my hon. Friend the Member for Dunfermline, East found was in the Touche Ross report, which said that there would be a possibility of obtaining contracts for the refitting of ships from the South African or Argentine navies.

As yet we do not know a great deal about agency management. When the Secretary of State introduced the open government document and started the so-called consultation period, he claimed that there were examples of agency management in the United States. There are, but they are concerned with military vehicles, arms and munitions. The Secretary of State was not to know this, but it is easy to see why his golden boy, Mr. Levene, knew about the suppliers of golden screwdrivers, and so on, because it was in that area of production that Mr. Levene made his reputation in Britain.

While there is no experience of a similar undertaking to Rosyth and Devonport in the United States, Peat Marwick's researches on behalf of Plymouth council show that there is a dockyard in Australia where 2,500 people are employed refitting six navy Oberon class submarines on a cost plus agreed profit basis. The common feature of the American and Australian experience is that in both countries the tender has not been transferred to any other firm since the scheme started. So much for the prospect of competition between firms and the prospect of change.

It is true that profitability has been high. However, there does not seem to be much likelihood of there being substantial savings to the taxpayer, as is hoped by the Minister of State. One of the most famous cases is the American firm, General Dynamics, the activities and contracts of which are still under suspension pending investigation by the American Government.

It is against that background that we are sceptical and incredulous at the Government's proposals. Horror has been expressed by virtually everyone who made representations. The Select Committee on Defence received only one piece of evidence in support of the proposals, which amounted to a nine-line letter, the first line of which reads: Privatisation could put the Navy at risk in some circumstances. Perhaps in the interests of brevity, Mr. Garnett decided not to go further, but starting off a letter of support like that speaks volumes for the extent of confidence in the proposals that those in the know have.

The Select Committee on Defence expressed disapproval of virtually every aspect of the Ministry's handling of the proposals. We had an interim report condemning them and calling for responses. We then had a statement from the Committee saying: Our misgivings about the Government's intentions have not been allayed by the evidence we have been given orally and in writing since our last Report. As has been said many times, the Committee is not made up of a majority of Labour supporters. The members of it are respected for their independent approach. While we might not agree with all of them, it is strange that on such a controversial issue, which is endowed with an ideological content, a majority of Conservatives should come out against the proposals in the frank way that they have. Members of the Committee raised substantial objections. They spelt out those objections in the first report, but the Minister's responses in no way modified their position in the second report. They identified as a major difficulty the discontinuity of management.

The Committee made it clear that a seven-year cycle could impede planning and affect morale. It has already been admitted that the work force is apprehensive about and has rejected the interim measures that the Ministry is endeavouring to pass. Anxieties have been repeatedly expressed about the problems of retaining British ownership of the companies that are granted franchises, and about the possibility that the parent companies of franchisers could be taken over by foreign enterprise. The Minister must satisfy the House and say why he is confident that that cannot take place.

By what mechanism can a British Government ensure that the parent company of one of the organisations responsible for carrying out the franchise work will not be subject to a foreign takeover, thus allowing the contracting company to become foreign owned? We will worry, and can only speculate, about the uncertainty during the period before a contract is renewed. Will the Minister tell us about the status of the contract during the year in which reselection will occur? Can he say something about management indifference following deselection, if that happens? We can imagine the Government's frustration if there were a short list of one which did not accord with the Government's wishes. In those circumstances, are the Government prepared to put in their own nominee, as the Conservative party usually does on such occasions, or, as the Government sometimes do in extremis, to nominate themselves? Officials have recognised that in their discussions with the Committee. They admit that there may be a short-term problem of managing transition. It may be short term, but it will be serious if nuclear work must be done.

Many people are greatly worried that the work group, which is responsible for nuclear maintenance work, is skilled and tightknit, and that we could not afford to have it broken up. In the long term, the interest which is shown in Rosyth may be a testimony to that sort of work, compared with the apparent indifference and almost reluctance of many of the contractors to grasp the nettle that is Devonport.

Will the Minister confirm that in an exchange with the hon. Member for Plymouth, Drake (Miss Fookes) he said that there was no likelihood of Devonport being broken up and sold off in sections? Will he explain the status of clause 1(2)(b), which states that that is possible. It refers to the transfer of the whole or any part of the dockyard undertaking to that or another company with a view to that company providing any of the designated dockyard services at the dockyard under contract. That clause gives a wholly different view from the impression that the Minister sought to convey to the hon. Lady. Our anxiety is not simply that Devonport could be sold off, but that it could be split into smithereens—a variety of companies and groupings—which could compound all the problems of security, transition and investment. That is a critical point on which the Minister will have to satisfy the House. He is taking powers in the Bill, but as is often the case with Government legislation that is ill-thought out and ill prepared, it may well be amended on the hoof in Committee. Will this be amendment No. 1? We are entitled to an answer, because, given the existence of that clause, the Minister has failed to allay the fears of hon. Members.

The Minister has even had difficulties convincing those who have constituency interests or some knowledge, understanding and respect for the work done in those yards. There has been extreme reluctance to support the Government. In many respects, we have seen displays of Conservative Back-Bench loyalty above and beyond the call of duty.

We are also worried about the guarantees that can be given in respect of the work in the dockyards. We have heard a great deal about the 70–30 split which the Minister hopes to introduce after about 18 months. But what is the 100 per cent. about which we are talking? Does it cover the 22 per cent. of naval refitting, including the Royal Fleet Auxilaries? If so, we are talking about a 70–30 split not of all the work available, but of about 78 per cent. of that work.

We must also take account of further slippage if we subtract the work done at Portsmouth. The hon. Member for Portsmouth, South (Mr. Hancock) would, if he were present, be concerned about the prospects for Portsmouth. Is Portsmouth to be set aside?

The potential figure of 54.5 per cent. of work being made available to the dockyards is the source of anxiety among dockyard workers about the prospects for further unemployment. They see the work being contracted out almost before their eyes, and the figures and quotations they have been given are not the ones that the Minister has at the back of his mind. We know that there are many problems associated with unprogrammed work. The Ministry has said that there will be alternative provision for emergency work in the future and that this would be made as and when required. Frankly, the very nature of unprogrammed work suggests national emergencies and raises questions of defence and security. This kind of ad hockery is just not good enough when the nation's security is at stake.

As well as finding a place for the work to be done, problems could also arise about who is to do it. Some of the British suppliers do not give cause for a great deal of confidence. Indeed, the Select Committee considered the record of organisations such as Plessey, which has been somewhat less than dependable in respect of the torpedo programme.

Mr. Sayeed

If there is an emergency, be it short or longer term, people can be pulled off mid-life ship refits and put on to emergency work, such as fitting a new weapon. Secondly, as the personnel will be privately organised, the opportunities for undertaking extra work and overtime will be enhanced. That would not be the case if they remained in the Civil Service.

Mr. O'Neill

As the potential enemy sails up the Channel, there will be the unedifying prospect of trade unions, contractors and the Government sitting round a table trying to work out the price for the job and transfers from one yard to another—the kind of thing that did not happen during the Falklands war because the morale and the commitment were there. I assure the House that in the future the morale and commitment will be there from the work force, but there is no guarantee that they will be there from the new contractual owners who could well see their prospects of profit slipping through their fingers. The flexibility that the hon. Gentleman mentioned becomes even more difficult when there are separate contracts for two yards.

Sir Antony Buck


Mr. O'Neill

I shall not give way, because I am just coming to the end. I am sorry, because I know that the hon. and learned Gentleman has been stopped before from intervening.

Separate contracts are a major problem. They are causing a great deal of anxiety. They will require far more than additional arrangements. They could create barriers between Rosyth and Devonport, the like of which have never existed before.

The prospects for the savings and changes in resources from tail to teeth and the like are far outweighed by the problems that we have identified. There are doubts about investment. As a country, we shall continue to own the assets, but the question of who will pay for the rental of new assets is vague. What will be the management's reward for its own investment? Will it be added to the profits? Will management be compensated? Such matters must be resolved. The Minister has not so far answered those points.

I suspect that if the Government, in their indecent haste to get the Bill on the statute book, tell us that the 19 committees will report within the next 10 days—by which time I imagine that the Bill will be in Committee—that might satisfy the House, but our experience of Civil Service committees suggests that it will take rather longer than 10 days to cover the points of anxiety which have been expressed by everyone here.

The Opposition are worried about national security and the working conditions and the rights of the work force. The Minister has to some extent given some guarantees about those matters, but we are not yet satisfied of one essential element of workers' rights—security of employment—because everything draws us to the conclusion that we shall see a deterioration in the working conditions and job security of people in areas of already high unemployment. That might be accepted in Harrow and the south-east, but in the south-west and the north such problems are far too apparent and real for us to accept the blandishments of a Minister of State in a hurry.

This enabling Bill is an unsatisfactory answer to what everyone regards as a problem. Everyone is now talking about solutions. There is a willingness on the part of trade unions and management and some sections of the Conservative party—certainly within the Select Committee on Defence—to participate in a consultative process, because everyone knows that the status quo is not an option. However, we are not prepared to accept the type of option offered by the Bill—an option which is a slap in the face for the work force and an insult to the management and which will endanger the country's security.

9.40 pm
Mr. Norman Lamont

With the leave of the House, I should like to reply to the debate.

The rapture of some of my hon. Friends has been modified in their speeches on the Bill, but the most passionate speech against the Bill came from the right hon. Member for Blaenau Gwent (Mr. Foot). I nearly referred to him as the right hon. Member for Ebbw Vale and at times I even thought that he was still the hon. Member for Plymouth, Devonport campaigning against Randolph Churchill 40 years ago. He made practically the same speech as he might have made against any steel, colliery or hospital closure.

The right hon. Member for Blaenau Gwent took us back in history to the time of Henry VIII and John Hawkins, and said that Conservative Members were not interested in history. I should report for his benefit that Samuel Pepys, when Secretary of the Admiralty, had a rather different view of the royal dockyards from that of the right hon. Gentleman. In his diary, Samuel Pepys recorded sticking his fingers through new paint and finding rotten planks which had not been properly repaired. The right hon. Gentleman's recollection of history is selective and he does not address himself to the problems that exist in the dockyards today. He talked about the ideas incorporated in the Bill as though they were ideas from Mars—but anything to do with economics seems to strike the right hon. Gentleman as something from another planet.

The right hon. Member for Blaenau Gwent was certainly wrong when he quoted the Library reference sheet and disputed the fact, which I had made very clear in opening the debate, that on conditions of employment, redundancy, pay and leave, the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply, so employees can be satisfied on that point.

The right hon. Member for Llanelli (Mr. Davies) asked two questions about foreign ownership. He asked me about foreign ownership generally and I replied that tenders would be sought from British companies. He then asked what would happen if a company which had been awarded the contract came under foreign control or became subject to substantial foreign influence. In such conditions it would be written into the contract that the company would lose the contract to manage the yards.

The right hon. Member for Llanelli also asked for an assurance that the unallocated programme would be placed only with British companies. Provided that the work arises in the United Kingdom, that will happen. The right hon. Gentleman will appreciate, however, that sometimes the Navy needs emergency work almost anywhere in the world.

Mr. Denzil Davies

Will the Minister define "substantial" in relation to substantial holdings of shares in the parent company? Does that mean that the contract will be terminated and the Ministry of Defence will go through the whole tender process once more?

Mr. Lamont

The precise proportion of shareholding would have to be written into the contract. That has not been defined as such, but a company that entered into the undertaking would know exactly what it was embarking on, as would any company likely to develop a connection with that company.

The right hon. Member for Llanelli also asked about the core programme, and questioned whether it would be more or less than half the existing programme of the dockyards. I made it clear in my opening speech that the initial programme would be roughly the current level of Rosyth and Devonport combined. That would be the position at the beginning of the period of the contract.

The right hon. Gentleman then asked what proportion of the programme would be priced competitively. I could make the point that none of the work at present is priced competitively in the sense in which he asked the question. When we award a tender we shall certainly be looking for a commitment to risk pricing, quotations covering hourly rates and overhead recovery. From the very beginning there will be a strong element of competitive pricing.

Mr. Denzil Davies

It is a very simple question: What percentage of the total work carried on in the dockyard will be subject to the tender programme and subject to tender?

Mr. Lamont

The companies will tender for the contract and for the individual contracts within that contract. In assessing which company wins, we shall obviously look at the proportion. No proportion is laid down in advance. We shall look at the companies and decide which one gives the biggest element of price competition.

The hon. Member for Dunfermline, West (Mr. Douglas) referred to the quality of the work done at Rosyth on the deterrent and asked where we could find such work done better. We have no complaint about the quality of that work. I agree with the hon. Gentleman that the quality is extremely high, but that is not the only work carried out at Rosyth. The fact that work on the deterrent is done well does not mean that there is no argument for introducing commercial management for the other elements in the work of that yard and the opportunity for Rosyth to tender for other unallocated work. The threat to the deterrent from the Bill is certainly far less than the threat from Labour party policy.

As I have said, there is also the opportunity for extra work. With active commercial management and good corporate marketing, these companies will have the skill to build on the many centres of excellence in the two yards. There is the possibility of ship refitting and work on oil rig modules which the yards cannot go for at the moment. Both enterprises have the capacity and unrivalled skills to attract engineering work, including specialist skills and facilities for casting and machining, but they will obtain that extra work only if they are competitive. Several potential bidders have already begun to identify work of that nature which they believe could be secured for the two yards. In addition, the two yards will have the opportunity to bid for the unallocated defence programme; and, if they are competitive, they will secure a significant proportion of that work.

The right hon. Member for Plymouth, Devonport (Dr. Owen) said that it was absurd to separate capital investment decisions from the responsibility for running a facility, but what is proposed in the Bill is by no means unprecedented in the world. In quite a large number of defence facilities in the United States capital investment has been made by the Government.

Mr. Foot

Not in dockyards.

Mr. Lamont

Not in dockyards, but there are about 60 Government-owned contractor-operated plants covering the manufacture of aircraft, missiles, tanks, naval weapons, and so on, so the argument that capital investment and responsibility for running cannot be separated does not stand up. As my hon. Friend the Member for Tayside, North (Mr. Walker) has said, this may be the development of an idea, it may even be a new idea, but it is not necessarily to be condemned for that.

The right hon. Member for Devonport is sometimes so outspoken about privatisation that he is accused by his Liberal colleagues of being a closet Thatcherite. This measure brings the disciplines of the private sector and competition into the dockyards. I am surprised that the right hon. Gentleman does not apply to his own constituency the philosophy that he so boldly expounds on other occasions. This measure will increase efficiency and competition.

The right hon. Member for Devonport was less than fair to my right hon. Friend the Secretary of State when he said that the redundancies at Devonport and Rosyth had been created at the fiat of the Secretary of State. Those redundancies were necessary if the dockyards are to become efficient. The Public Accounts Committee, which has been critical of the Government's actions, has criticised the efficiency measures that have been taken at Devonport and Rosyth. It claims that they are not what is required. The right hon. Member for Devonport, for all his alleged toughness and tenderness combined, is not facing the issue. Many people have criticised these yards. There is a need for them to become efficient.

The main criticism which has been made in the debate is that, in some sense, the Government's proposition is not proven and does not guarantee results. That was the view put forward by the right hon. Member for Devonport, and that was why he advanced the idea of a trading fund. The trading fund concept does not address the problem in its totality. It does not bring about a sufficient separation of the customer and the supplier, it does not provide the spur of competition, and it does not create conditions in which the contractor is anxious to get his contract renewed.

I was interested that the hon. Member for Clackmannan (Mr. O'Neill) should describe the scheme as a form of reselection. That is a word that looms large in the minds of Opposition Members. The hon. Member for Dunfermline, East (Mr. Brown) said that there had been far too cosy a relationship between the yards and the Ministry of Defence. That is precisely right. That is why a trading fund is not the right solution. We need to separate the customer and the supplier.

If the right hon. Member for Devonport thought that the trading fund solution was the answer to the problem of the dockyards, he could have introduced a trading fund when he was the Minister with responsibility for the Navy. He could have introduced such a fund in 1978 when he was a member of the Labour Government that examined the proposition and decided to do nothing.

Dr. Owen

The Minister comes fairly new to the Department. When I was Minister with responsibility for the Navy, I introduced Leslie Norfolk from ICI and set up the Mallabar committee, which recommended a trading fund. I have fought three elections at Devonport on the basis of supporting a trading fund.

Mr. Lamont

The right hon. Member for Devonport may have done some good things, but he did not go far enough earlier and he does not go far enough now.

It has been accepted for many years that a change in the yards is necessary. The PAC in its report pointed out that between 1971 and 1982 there were five major reports, all of which were critical of the performance of the dockyards. In its latest report the PAC referred to changes having little resulting real progress or effective action; we also considered the effect of current weaknesses in Dockyard performance and management. The fourth report of the Select Committee, which has been critical of what the Government are doing, acknowledged that there was no support for an unreformed status quo. Everyone agrees that change is necessary. The only reason why Labour Members have become overnight converts to change of some kind is that they want any change other than change by a Government who recognise the problem and are determined to tackle it.

The reason for putting forward these proposals is to increase efficiency and effectiveness, not to reduce the number of civil servants. The motive is to get value for money. The Opposition seem to think that there is something wrong in trying to get value for money within the defence budget. As my hon. Friend the Member for Northampton, North (Mr. Marlow) said, it is all very well to talk about the effectiveness of our fighting force, but that force does not exist in a world where there are no limits on the defence budget.

If we manage by these proposals to save £30 million a year, over four years that will mean another frigate for the Royal Navy or another six or seven Tornadoes. If the right hon. Member for Blaenau Gwent does not like the thought of military equipment, he should consider that that saving could mean six 300-bed hospitals. Is anyone saying that that sort of saving is not worth working for and achieving?

The right hon. Member for Devonport and my hon. Friends the Members for Drake and for Cornwall, South-East (Mr. Hicks) referred to the insecurity that the labour force will feel if its members are put into a management company which might in turn change in another seven years. I understand those fears, but I hope that the right hon. Gentleman and my hon. Friends will not exaggerate or lend unjustified credence to them. As I said when opening the debate, pay, conditions of service and pensions will be unaffected by the transfer. The core programme of work will remain, and that will be equal to the existing work programme at both Devonport and Rosyth. In addition, there will be the opportunity to tender for the unallocated proportion of the work.

The right hon. Member for Devonport advanced a curious argument when he said that if the ownership of the operating company changed in seven years, the employees of that company would have no guarantee of employment. As I have said, the core programme will continue. There will continue to be a need for naval refits and naval dockyards. If the ownership of the management company changes while the assets remain in the Government's hands, that will not alter the need for continuing refits and a continuing programme for the Royal Navy.

There has been criticism by the Pubic Accounts Committee and the Select Committee on Defence of the figures that the Government have produced for the savings that might result from introducing the dockyards to private management. When the Government last gave evidence to the Committee, they made it clear that the savings might be over £30 million, or 7.5 per cent. of turnover. Surely that would be a worthwhile saving. However, these are merely illustrative figures. No one would ever claim that such figures are anything but illustrations. Much depends on productivity improvements and the enterprise that is brought to the dockyards by outside management.

We are confident that private management of the dockyards will result in greater efficiency and productivity increases. Such developments are bound to result in more savings than if the dockyards continue to be operated by civil servants within a Government Department.

We have heard much talk from Labour Members about the effectiveness of our forces. I find that a bit rich from a party which is dedicated and committed to cutting defence spending. I find it a bit rich from a party which, when in office, cut defence spending to the lowest level in real terms since the end of the Korean war. Above all, it is utterly hypocritical that there should be so much said, as my hon. Friend the Member for Tayside, North observed, about unemployment at Rosyth. Work on the independent deterrent accounts for more than 50 per cent. of turnover at Rosyth. If the Labour party's policy is implemented, it will result in hardly anything being left there. Labour Members weep crocodile tears over non-existent dole queues at Rosyth while adhering to the policy of abandoning our independent deterrent, which would have a catastrophic effect on Rosyth.

The proposals in the Bill are designed to achieve better value for money. They will increase the effectiveness of our forces and improve our defences. Those ideas are not of interest to the Labour party, but they have been backed by the Navy as well as by Ministers. For that reason, the Bill deserves the support of the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 257, Noes 171.

Division No. 14] [10 pm
Adley, Robert Clark, Sir W. (Croydon S)
Aitken, Jonathan Clarke, Rt Hon K. (Rushcliffe)
Alexander, Richard Clegg, Sir Walter
Alison, Rt Hon Michael Cockeram, Eric
Amess, David Colvin, Michael
Arnold, Tom Conway, Derek
Ashby, David Coombs, Simon
Aspinwall, Jack Cope, John
Atkins, Robert (South Ribble) Cormack, Patrick
Baker, Rt Hon K. (Mole Vall'y) Couchman, James
Baker, Nicholas (Dorset N) Cranborne, Viscount
Banks, Robert (Harrogate) Critchley, Julian
Batiste, Spencer Crouch, David
Beaumont-Dark, Anthony Currie, Mrs Edwina
Bellingham, Henry Dickens, Geoffrey
Bendall, Vivian Dicks, Terry
Benyon, William Dorrell, Stephen
Bevan, David Gilroy Douglas-Hamilton, Lord J.
Biffen, Rt Hon John Dover, Den
Biggs-Davison, Sir John du Cann, Rt Hon Sir Edward
Blackburn, John Dunn, Robert
Body, Richard Dykes, Hugh
Boscawen, Hon Robert Edwards, Rt Hon N. (P'broke)
Bottomley, Peter Eggar, Tim
Bottomley, Mrs Virginia Evennett, David
Bowden, A. (Brighton K'to'n) Eyre, Sir Reginald
Bowden, Gerald (Dulwich) Fairbairn, Nicholas
Boyson, Dr Rhodes Fallon, Michael
Braine, Rt Hon Sir Bernard Farr, Sir John
Brandon-Bravo, Martin Fenner, Mrs Peggy
Bright, Graham Fletcher, Alexander
Brinton, Tim Forman, Nigel
Brittan, Rt Hon Leon Franks, Cecil
Brooke, Hon Peter Garel-Jones, Tristan
Brown, M. (Brigg & Cl'thpes) Glyn, Dr Alan
Browne, John Goodhart, Sir Philip
Bruinvels, Peter Goodlad, Alastair
Bryan, Sir Paul Gower, Sir Raymond
Buchanan-Smith, Rt Hon A. Grant, Sir Anthony
Buck, Sir Antony Gregory, Conal
Budgen, Nick Griffiths, Sir Eldon
Bulmer, Esmond Grist, Ian
Burt, Alistair Grylls, Michael
Butcher, John Gummer, Rt Hon John S
Butler, Rt Hon Adam Hamilton, Hon A. (Epsom)
Carlisle, Kenneth (Lincoln) Hampson, Dr Keith
Carlisle, Rt Hon M. (W'ton S) Hanley, Jeremy
Carttiss, Michael Hawksley, Warren
Cash, William Hayward, Robert
Chapman, Sydney Heathcoat-Amory, David
Churchill, W. S. Heddle, John
Clark, Dr Michael (Rochford) Henderson, Barry
Holland, Sir Philip (Gedling) Ridley, Rt Hon Nicholas
Holt, Richard Ridsdale, Sir Julian
Hordern, Sir Peter Rifkind, Malcolm
Howard, Michael Rippon, Rt Hon Geoffrey
Howell, Rt Hon D. (G'ldford) Roberts, Wyn (Conwy)
Howell, Ralph (Norfolk, N) Robinson, Mark (N'port W)
Irving, Charles Roe, Mrs Marion
Kershaw, Sir Anthony Rossi, Sir Hugh
Knowles, Michael Rowe, Andrew
Lamont, Norman Rumbold, Mrs Angela
Lang, Ian Sackville, Hon Thomas
Lawrence, Ivan Sainsbury, Hon Timothy
Leigh, Edward (Gainsbor'gh) St. John-Stevas, Rt Hon N.
Lennox-Boyd, Hon Mark Sayeed, Jonathan
Lester, Jim Shaw, Giles (Pudsey)
Lewis, Sir Kenneth (Stamf'd) Shaw, Sir Michael (Scarb')
Lightbown, David Shelton, William (Streatham)
Lilley, Peter Shepherd, Colin (Hereford)
Lloyd, Ian (Havant) Shepherd, Richard (Aldridge)
Lloyd, Peter, (Fareham) Silvester, Fred
Lyell, Nicholas Sims, Roger
McCrindle, Robert Skeet, T. H. H.
Macfarlane, Neil Smith, Tim (Beaconsfield)
MacKay, Andrew (Berkshire) Spence, John
MacKay, John (Argyll & Bute) Spencer, Derek
Maclean, David John Spicer, Jim (Dorset W)
McNair-Wilson, M. (N'bury) Squire, Robin
McQuarrie, Albert Stanbrook, Ivor
Madel, David Stanley, John
Major, John Steen, Anthony
Malins, Humfrey Stevens, Lewis (Nuneaton)
Malone, Gerald Stevens, Martin (Fulham)
Maples, John Stewart, Andrew (Sherwood)
Marland, Paul Stokes, John
Marlow, Antony Stradling Thomas, Sir John
Marshall, Michael (Arundel) Sumberg, David
Mates, Michael Taylor, John (Solihull)
Mather, Carol Taylor, Teddy (S'end E)
Maude, Hon Francis Temple-Morris, Peter
Maynard, Miss Joan Terlezki, Stefan
Mellor, David Thomas, Rt Hon Peter
Merchant, Piers Thompson, Donald (Calder V)
Meyer, Sir Anthony Thompson, Patrick (N'ich N)
Miller, Hal (B'grove) Thornton, Malcolm
Mills, Iain (Meriden) Townend, John (Bridlington)
Miscampbell, Norman Townsend, Cyril D. (B'heath)
Moate, Roger Tracey, Richard
Montgomery, Sir Fergus Trippier, David
Morris, M. (N'hampton, S) Trotter, Neville
Morrison, Hon C. (Devizes) Twinn, Dr Ian
Morrison, Hon P. (Chester) van Straubenzee, Sir W.
Moynihan, Hon C. Viggers, Peter
Mudd, David Waddington, David
Neale, Gerrard Walden, George
Newton, Tony Walker, Bill (T'side N)
Nicholls, Patrick Walker, Rt Hon P. (W'cester)
Norris, Steven Wall, Sir Patrick
Onslow, Cranley Waller, Gary
Oppenheim, Phillip Wardle, C. (Bexhill)
Oppenheim, Rt Hon Mrs S. Warren, Kenneth
Ottaway, Richard Watson, John
Page, Sir John (Harrow W) Watts, John
Parkinson, Rt Hon Cecil Wells, Bowen (Hertford)
Parris, Matthew Wells, Sir John (Maidstone)
Patten, Christopher (Bath) Wheeler, John
Pattie, Geoffrey Whitfield, John
Pawsey, James Whitney, Raymond
Percival, Rt Hon Sir Ian Wiggin, Jerry
Pollock, Alexander Winterton, Nicholas
Portillo, Michael Wolfson, Mark
Powell, William (Corby) Wood, Timothy
Powley, John Woodcock, Michael
Prentice, Rt Hon Reg Young, Sir George (Acton)
Price, Sir David Younger, Rt Hon George
Raffan, Keith
Rathbone, Tim Tellers for the Ayes:
Renton, Tim Mr. Michael Neubert and
Rhodes James, Robert Mr. Tony Durant.
Rhys Williams, Sir Brandon
Adams, Allen (Paisley N) Home Robertson, John
Alton, David Howells, Geraint
Anderson, Donald Hoyle, Douglas
Archer, Rt Hon Peter Hughes, Robert (Aberdeen N)
Ashton, Joe Hughes, Roy (Newport East)
Atkinson, N. (Tottenham) Hughes, Sean (Knowsley S)
Bagier, Gordon A. T. Hughes, Simon (Southwark)
Banks, Tony (Newham NW) Janner, Hon Greville
Barnett, Guy John, Brynmor
Beckett, Mrs Margaret Jones, Barry (Alyn & Deeside)
Benn, Rt Hon Tony Kaufman, Rt Hon Gerald
Bennett, A. (Dent'n & Red'sh) Kennedy, Charles
Bermingham, Gerald Kilroy-Silk, Robert
Bidwell, Sydney Kinnock, Rt Hon Neil
Boyes, Roland Lambie, David
Bray, Dr Jeremy Lamond, James
Brown, Gordon (D'f'mline E) Leighton, Ronald
Brown, N. (N'c'tle-u-Tyne E) Lewis, Ron (Carlisle)
Brown, Ron (E'burgh, Leith) Lewis, Terence (Worsley)
Bruce, Malcolm Litherland, Robert
Buchan, Norman Livsey, Richard
Caborn, Richard Lloyd, Tony (Stretford)
Callaghan, Rt Hon J. Lofthouse, Geoffrey
Callaghan, Jim (Heyw'd & M) Loyden, Edward
Campbell, Ian McCartney, Hugh
Campbell-Savours, Dale McDonald, Dr Oonagh
Canavan, Dennis McKay, Allen (Penistone)
Carter-Jones, Lewis McKelvey, William
Cartwright, John MacKenzie, Rt Hon Gregor
Clark, Dr David (S Shields) Maclennan, Robert
Clarke, Thomas McNamara, Kevin
Clay, Robert McTaggart, Robert
Clwyd, Mrs Ann McWilliam, John
Cocks, Rt Hon M. (Bristol S.) Madden, Max
Cohen, Harry Marek, Dr John
Cook, Frank (Stockton North) Marshall, David (Shettleston)
Cook, Robin F. (Livingston) Martin, Michael
Corbett, Robin Mason, Rt Hon Roy
Corbyn, Jeremy Maxton, John
Cunliffe, Lawrence Maynard, Miss Joan
Cunningham, Dr John Meacher, Michael
Davies, Rt Hon Denzil (L'lli) Meadowcroft, Michael
Davis, Terry (B'ham, H'ge H'l) Michie, William
Deakins, Eric Mikardo, Ian
Dewar, Donald Mitchell, Austin (G't Grimsby)
Dormand, Jack Morris, Rt Hon A. (W'shawe)
Douglas, Dick Morris, Rt Hon J. (Aberavon)
Duffy, A. E. P. Nellist, David
Eadie, Alex Oakes, Rt Hon Gordon
Eastham, Ken O'Brien, William
Ewing, Harry O'Neill, Martin
Fatchett, Derek Owen, Rt Hon Dr David
Field, Frank (Birkenhead) Park, George
Fields, T. (L'pool Broad Gn) Patchett, Terry
Flannery, Martin Pavitt, Laurie
Foot, Rt Hon Michael Penhaligon, David
Forrester, John Pike, Peter
Foster, Derek Powell, Raymond (Ogmore)
Foulkes, George Radice, Giles
Fraser, J. (Norwood) Randall, Stuart
Freud, Clement Rees, Rt Hon M. (Leeds S)
George, Bruce Richardson, Ms Jo
Gilbert, Rt Hon Dr John Roberts, Ernest (Hackney N)
Godman, Dr Norman Robertson, George
Golding, John Robinson, G. (Coventry NW)
Gould, Bryan Rogers, Allan
Gourlay, Harry Rooker, J. W.
Hamilton, James (M'well N) Rowlands, Ted
Hamilton, W. W. (Fife Central) Sedgemore, Brian
Hancock, Mr. Michael Sheerman, Barry
Harman, Ms Harriet Sheldon, Rt Hon R.
Harrison, Rt Hon Walter Shore, Rt Hon Peter
Hart, Rt Hon Dame Judith Short, Mrs ft.(W'hampt'n NE)
Hattersley, Rt Hon Roy Skinner, Dennis
Haynes, Frank Smith, C.(Isl'ton S & F'bury)
Heffer, Eric S. Snape, Peter
Hicks, Robert Soley, Clive
Hogg, N. (C'nauld & Kilsyth) Spearing, Nigel
Holland, Stuart (Vauxhall) Stewart, Rt Hon D. (W Isles)
Stott, Roger Williams, Rt Hon A.
Thomas, Dafydd (Merioneth) Wilson, Gordon
Tinn, James Winnick, David
Torney, Tom Young, David (Bolton SE)
Wainwright, R.
Wallace, James Tellers for the NOES
Wardell, Gareth (Gower) Mr. Mark Fisher and
Weetch, Ken Mr. Ron Davies.
White, James

Question accordingly agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).