HC Deb 23 July 1986 vol 102 cc548-68

Lords amendment: No. 1, in page 2, leave out lines 3 to 12 and insert makes arrangements—

  1. (a) for a company to provide designated dockyard services at the dockyard under contract whit him, and
  2. (b) for that or another company—
    1. (i) to become the employer of such of the qualified dockyard service employees at the dockyard as are employees to whom the arrangements apply, and
    2. (ii) to acquire from him rights in or over the dockyard or any part of it and any property used for the purposes of the dockyard undertaking, with a view to their services and that property being made available for the provision of the designated dockyard services at the dockyard,"

3.30 am
The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee)

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Harold Walker)

With this it will be convenient to consider the following Lords amendments: No. 4, in page 2, line 28, leave out "(a)" and insert "(b)" No. 5, in line 33, leave "(a)" and insert "(b)" No. 6 in page 3, line 14, after "provides" insert "services which are" No. 7, in line 16, leave out from "by" to "enables" in line 17 and insert making the services of employees or property available, No. 8, in clause 2, page 3, line 41, leave out by the Secretary of State".

Mr. Lee

This amendment and amendments Nos. 4 to 8 refer to the possible company structure at each dockyard.

As the House will recall, my right hon. Friend the Secretary of State will set up a Companies Act company at each dockyard into which the respective work force would transfer on vesting day in April 1987. Each of these two companies will then be transferred into the ownership of whichever company had successfully tendered to manage the particular dockyard. So far as the structure of the companies which my right hon. Friend sets up is concerned, the Bill allows him to decide which of a number of options is preferable.

Under one option, the company which my right hon. Friend forms would not only employ the work force but would be the company with which he would place the term contract, set initially for a period of seven years, and individual contracts for ship and other refit work. Under this option, there would be one company both contracting and employing at each dockyard. That has been called the concept of the operating company.

Under another option, the term contract and the individual work packages would be placed directly with the successful bidder. The services of the work force employed by the company set up by my right hon. Friend would then be used by the contractor to perform the contract. There would, therefore, be one company contracting — the managing company — and another company — the dockyard or employing company — at each dockyard. On vesting day the dockyard or employing company would become a wholly owned subsidiary of the managing company formed by the successful bidder, at each dockyard. This has been described as the concept of the employing company.

We have always said that there was another option, that of a Government-owned plc—if there were insufficient interest from companies in managing the dockyards or if their responses to our invitation to tender were unacceptable for any reason. I am, however, glad to say that, with three companies, or consortia, interested in bidding for each dockyard, we expect a good competition, which should produce very satisfactory results.

Mr. Gordon Brown (Dunfermline, East

Will the Minister explain when he expects vesting day to be? What will be the final date for the submission of tenders? Will he comment on the application by Brown and Root (UK) Ltd., which might lead to an extension of the date by which tenders must be submitted?

Mr. Lee

I shall come to the hon. Gentleman's points in due course. There has been no change from the position in Committee about vesting day. Vesting day will be 1 April 1987.

The third of the three companies which have been invited to bid for the contract to manage Devonport dockyard is Brown and Root (UK) Ltd. The company, which was formally invited to tender only last week, has requested an extension to the tender period. The Government welcome the interest which Brown and Root is showing and believe that the competition at Devonport will be significantly improved if an additional bid is made. I should tell the House that the Government have, therefore, agreed to a limited extension of the bid closing date for Devonport by four weeks, to 29 August. This extension will, of course, apply to all potential bidders for Devonport and will not delay the date for the introduction of commercial management to both dockyards of 6 April 1987. I must correct my previous statement that vesting day is to be 1 April 1987. That is incorrect. It is to be 6 April 1987. The date for responses to the invitation to tender for Rosyth remains 1 August.

Returning to the Bill, I was saying that it had always contained the three options for the corporate structure at each dockyard, as amended in another place, the Bill continues to retain all three options. The amendments which we are considering do not relate to the operating company or to the Government-owned plc with which, in relation to the provisions in the Bill, there was general satisfaction in another place. The amendments relate to the employing company concept — the two-company structure.

In another place concern was expressed about the separation of the dockyard work force, which would be in the employing company set up by my right hon. Friend, from the dockyard assets which would be used by the managing company under a licence granted to it by the Ministry of Defence. It was not, however, disputed that the assets should, as has always been our intention, remain in Government ownership.

Our view at one time was that the single company option represented the most attractive scheme for introducing commercial management into the dockyards. However, the principal difficulty with this option is associated with the termination, without renewal with the same contractor, of the term contract. The difficulty that I have in mind concerns the need in those circumstances to disentangle the liabilities of the company. No such difficulty would have to be faced under the two-company structure, where the employees are employed by a company which has attached to it none of the liabilities and obligations of a company which operates the dockyard under one contract.

I can tell the House that we have not ruled out the operating company concept if the difficulties that I have described can be overcome, but in our opinion the two-company structure offers more advantages for the employees and their representatives and for the Government. The companies which have been invited to tender for the contracts to manage the dockyards have been invited, when responding to that invitation, to state their views. In the meantime, however, the Government gave further consideration to ways in which the dislike expressed in another place for the two-company structure could be overcome. The amendments which we are considering were introduced by the Government in another place to address those concerns.

Effectively, the amendments ensure that, in the event of a two-company structure being adopted, the licence to use the assets would be an integral part, not of the managing company set up by the contractor, but of that set up by my right hon. Friend the Secretary of State, and into which would be transferred the dockyard work force. The terms of the licence would, of course, have to be negotiated between the Ministry of Defence and the selected contractor, but on vesting day that licence would come into effect directly between the Department and the company containing the work force. Their Lordships believed that those amendments had met their concerns.

Although these are Government amendments, they were introduced in response to concerns expressed in another place, and I invite the House to accept them.

Mr. Denzil Davies (Llanelli)

I am grateful to the Minister for writing to me on 14 July setting out the reasons for the Lords amendments, which he has reiterated. His comments demonstrate what a shambles the Bill is. It began as a shambles and, with the assistance of Lord Denning, it has become an even greater shambles. First, the Government said — and the Minister confirmed—that there would be one company. But we could not have one company, because there was a problem over the determination of the contract in relation to the employees if they were employed by the same company as held the contract and the licence to operate the assets.

In Committee, we were told that there would be two companies — a managing company and an employing company. The employing company was to be formed by the Secretary of State and the employees would be transferred to it. Presumably the shares in the employing company would be transferred to the managing company. The latter was to be owned by a consortium or by a company, if the contract went to only one company, and that management company was to hold the licence to operate the assets.

However, when the Bill went to the House of Lords, Lord Denning discovered the concept of the bees and the hive, and said that we cannot put the workers in one company and the licence to operate the assets—I see the Minister nodding—in another company. I do not know about that. I have read the debates in the other place. The Government were impressed by the arguments about the hive and the bees. Now it seems that the bees and the hive will be in one company — as the Under-Secretary of State said, in the employing company. The managing company will not have anything except shares in the hive and the bees. It will merely operate the dockyards under a managing contract. It will be a strange company, with no assets except, presumably, shares in the employing company.

I think that I preferred the original scheme, when the hive was in the hands of the managing company—I do not know whether the Minister would care to introduce a manuscript amendment to change it again — and the bees were with the employing company. The changes demonstrate the nonsense of the scheme. The nonsense is that the Government retain assets and transfer individuals, but nothing else. There is no transfer, except of employees.

The Government pretend that they are transferring a business, and they have redrafted the Bill to show it; but they are merely transferring people, who are being treated as chattels. The company gets only a licence to operate assets which are owned by the Government. It is a farcical system. Once the Government decided against complete privatization — hiving everything off — they came out with this hybrid scheme, which is neither private nor public ownership. The problem is that the Bill does not make sense in terms of the Transfer of Undertakings (Protection of Employees) Regulations 1981 or the framework of privatisation.

We do not oppose the amendments, because we think that they are nonsense. If the Government are prepared to carry on with this nonsense, that is a matter for them. Nothing is really affected. Will there be one or two companies? Where will the assets be? Presumably they will be with the employing company. Have the Government decided to have two companies? No. They still do not know, although the Minister has said that, if there was one company, there would be great problems with the termination of contracts at the end of seven years or, although it is extremely unlikely, earlier.

There will he the problems of the company's liabilities and debts, of employees being in the company and of the Government's licence to operate the assets. The problems are horrendous. It would have been better if the Government had dropped the Bill rather than grafted one nonsense on to another, which is what the Minister is doing.

No doubt the Minister will tell us more about the company that he has found at the last minute to bid for Devonport — to the relief, no doubt, of the Ministry of Defence. I understand that it is an American company. We will not oppose the amendments. We believe that they are nonsense and that they highlight the nonsense of the Bill.

Dr. David Owen (Plymouth, Devonport)

This miserable Bill is before us again. The fact that it is 3.30 in the morning and the two other, Conservative, Members of Parliament for Plymouth are not present is a marked criticism of how we conduct our business.

I understand that the Bill was thought to be illegal in European Community law. Lord Denning drew attention to European Commission directive 77 in so far as the assets were being separated from the contractor. I understand that it is because of the threat of a challenge to the Bill that the Government have changed it.

It is extraordinary that we are still talking about three options. It is high time that the Government told the House straight what they intend to do. The company's structure is still utterly unclear. The fundamental flaw in the Bill is its separation of the work force from the assets.

The Minister is a sensible man. He has heard all these arguments and they must drive him towards the logic of a Government-owned public limited company. That is by far the most sensible way out of this largely self-created mess. Now that the former Secretary of State, the right hon. Member for Henley (Mr. Heseltine), has flown the coop, we can all agree to drop this nonsense. The agency management proposal has been adjusted and adapted, and it must have taken hours of Civil Service and parliamentary time, to no avail. The Minister now tells us that, because the tenders for the contract in Devonport are wholly inadequate, he as had to extend the contract period by one months and has introduced a new company.

We used to hear about the management option which would solve all our problems. I understand that there have been financial difficulties, but it would have been a great deal better if management had spent its time persuading the Government to opt for a Government-owned plc. If the trade unions were taken into discussions, they would co-operate to make a Government-owned plc the least unsuccessful of all the options. I hope that the Government will consider that in the coming weeks.

3.45 am

The co-operation of the trade unions and the city of Plymouth would be much greater if the Government-owned plc option is chosen and if it was made abundantly clear that the enterprise would stay permamently in Government control and that this was not a stepping stone to later privatisation. The only purpose of keeping open the later privatisation option is to save the Government's face. If that option is kept open, it will undermine the morale of the work force and will not make for a successful Government-owned plc. Ministers know perfectly well that no nationalised company with these expensive asset; can possibly be floated. That is why the dockyards cannot be privatised normally.

I agree with the right hon. Member for Llanelli (Mr. Davies) that these amendments do not make a hap'orth of difference, except to expose the absurdity of the legislation. We accept them, but hope that the Government will stop proceeding on three options, will opt clearly for a Government-owned plc and will stop the farce of introducing Brown and Root as a new tenderer at this late stage.

Mr. Dick Douglas (Dunfermline, West)

This is an early hour of the morning to debate these amendments.

I must go back to 27 November 1985 and the second report on this matter by the Defence Select Committee. One would think that the Government had suddenly discovered something new in the concept of operating companies. Page 49 of that report contains all the arguments, now suddenly discovered by the Under-Secretary, which were then submitted by the Ministry of Defence to the Select Committee. We must ask ourselves what is new, apart from what happened in the other place?

We are dealing with a small enabling Bill of about 119 lines and we have debated it on Second Reading and in a long Committee stage. It has now returned from the other place. We are sorry that the new Secretary of State does not see fit to grace us with his presence, but I think he wants to distance himself as much as possible from the Bill. The right hon. Member for Ayr (Mr. Younger) has more sense than the right hon. Member for Henley (Mr. Heseltine) in pursuing this stupid proposal.

The idea of operating companies was canvassed by the Ministry of Defence. Hon. Members can read the report and see the criticisms made by potential bidders. The report states: The companies interested in the commercial management proposals have seen the concept as an unnecessary complication, since it divorces the company responsible for employing the workforce from the one operating the Dockyard and managing the programme of work. The balance canvassed at that time was to have the company doing the two things. The Minister, having examined what took place in the House of Lords, has introduced a variation on that theme. He tried to con the House—my hon. Friend the Member for Dunfermline, East (Mr. Brown) made, as usual, a succinct intervention — into believing that, notwithstanding, the sacred vesting day of 6 April 1987 will still be met. We do not believe that. We shall turn to the reasons we do not believe that when we consider the further amendments.

The Minister should come clean in parading, at such an early hour of the morning, that he has three consortia bidding for Devonport and, I believe, three consortia bidding for Rosyth. He has not told us anything about the quality of those consortia. He has not told us anything about the balance of expertise they have. I do not think that he will be embarrassed if I refer to a meeting that my hon. Friend and I had with the Secretary of State yesterday. The Minister was present. He introduced the amazing concept that Appledore International had persuaded him that offshore oil work would go to Rosyth. I do not know whether he has been studying the offshore oil industry, but it is difficult to get any sort of contract from the North sea. If the Minister has been persuaded on that, he could be persuaded on almost anything.

Mr. Martin J. O'Neill (Clackmannan)

Surely my hon. Friend cannot be surprised at Appledore's suggestion when at one stage Touche Ross suggested that the Argentine Navy might be a possible client.

Mr. Douglas

My hon. Friend is perfectly right. Appledore made many suggestions. Knowing your trade union background, Mr. Deputy Speaker—I share it—I am sure that you would quickly call me to order were Ito develop those. The Government are desperate to concoct any consortia that will look favourably at bidding for the dockyard contract. We must be careful of accepting what even this pleasant Under-Secretary of State puts forward. I do not think that the exercise will be to the benefit of the Navy, Devonport or Rosyth. I do not think that the Under-Secretary, in his better judment, believes that. We would do better to scrap the whole procedure.

My hon. Friend the Member for Dunfermline, East is quite right. I do not think that we can oppose the amendments. However, the Under-Secretary has not given the House a proper justification for how the Government propose to proceed and meet their timetable. He has not given us the necessary information so that hon. Members, trade unions and communities can evalute the consortia that are likely to bid — whatever concept of operating and employing companies is brought into being.

My hon. Friend mentioned Brown and Root. My understanding is that Brown and Root is a wholly-owned subsidiary of Halliburton. As far as I know—I may be wrong—Brown and Root has no experience in operating dockyards but lots of experience in building production platforms for the North sea and elsewhere, in managing construction sites and playing its part in oil refineries and chemical plants.

I should like to probe into what is happening with the management consortium of Devonport plc. I ask the Under-Secretary of State to tell us what is happening at Devonport and Rosyth. The dock's managing directors are simultaneously embarking on what might loosely be called a "management buy-out" and trying to manage the complicated workings of dockyards such as Rosyth and Devonport. How can that be done? What assurances will be given?

When the Select Committee on Defence probed this matter, we were given some vague assurances. We received a letter stating that certain cut-offs and restrictions were imposed on the management preventing them from using the dockyards' facilities. It cannot be true that people of such calibre and expertise in the dockyards can do their job of servicing the Navy while being in cahoots with the Brown and Roots and Foster-Wheelers of this world so that they can collectively make a bid for the operation of the dockyards come vesting day.

At the risk of repeating myself, I must say that, if Conservative Members are concerned about managing the nation, even in the early hours of the morning, they will say, "Take this measure away. It is too daft for words."

Mr. Lee

By leave of the House, Mr. Deputy Speaker I should like to take up some of the main points raised out of courtesy and, I hope, to add to my earlier explanation. I confirm that there are still three options— the single company concept, the two-company concept and the Government-owned plc.

Mr. Gordon Brown

Will the hon. Gentleman tell us exactly when a decision will be made on the option to be favoured by the Ministry of Defence? Can he give us some idea of the Government's timetable?

Mr. Lee

I am sure that the hon. Gentleman will have an opportunity to speak a little later. I shall come to the timetable later in these overall comments.

As the hon. Member for Dunfermline, East (Mr. Brown) said, Brown and Root is a wholly owned subsidiary of Halliburton Holdings, which was formed in December 1984 as a holding company for the United Kingdom interests of its American parent company, Halliburton Holdings Inc.

There are three contenders for the Devonport dockyard — [Interruption.] Hon. Members asked me questions, and I am endeavouring to answer them. There is the consortium of Foster-Wheeler, A and P Appledore and VSEL; the Devonport Dockyard Ltd management involvement; and Brown and Root.

I confirm that vesting day has not changed. We are talking about 6 April 1987. As the hon. Member for Dunfermline, East will know, the management at Rosyth has not formed itself into a company and is not one of the bidders.

I should like to explain the timetable. Tenders were issued on 3 April 1986. We expect receipt of tenders for Rosyth on 1 August and for Devonport on 29 August, which is the adjusted day to which I referred earlier. Broadly in the period August to November, there will be an evaluation of tenders and consideration by the Navy Board and Ministers. By late November, we hope that the contract award will be announced. By early December we hope that the contractors will enter what we term their phasing in period, with a view to commercial management commencing, as I have said, on 6 April 1987.

Question put and agreed to

Lords amendment: No. 2, in page 2, line 19, leave out subsection (4) and insert— (4) The Transfer of Undertakings (Protection of Employment) Regulations 1981 shall apply to the transfer of the dockyard undertaking or any part of it whether or not, apart from this provision, the undertaking would be treated as an undertaking in the nature of a commercial venture for the purposes of those Regulations, and, for those purposes, the services of the qualified dockyard service employees together with the rights in or over th dockyard and property used for the purposes of the undertaking shall be treated as a part of that undertaking capable of being transferred as a business whether or not the company which is to become their employer also provides designated dockyard services.

Read a Second time.

Mr. Lee

I beg to move, as an amendment to the proposed amendment, in line 2, after 'shall', insert 'subject to subsection (4A) below.'.

Mr. Deputy Speaker

With this it will be convenient to considering the following: Lords amendment No. 3, in page 2, line 26, at end insert— (4A) Before any employee in a Royal Dockyard is trans-ferred compulsorily without his consent from the service of the Crown to the service of any other employer the following provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 shall be fulfilled. (4B) Long enough before the transfer to enable consultations to take place between the Secretary of State and the representatives of the trade unions, the Secretary of State shall inform those representatives of—

  1. (a) the fact that the transfer is to take place, when approximately it is to take place, and the reasons for it;
  2. (b) the legal, economic and social implications of the transfer for the effected employees;
  3. (c) the measures which he envisages he (the Secretary of State) will, in connection with the transfer, take in relation to those employees; and
  4. (d) the measures which the transferee envisages he (the transferee) will, in connection with the transfer, take in relation to such of those employees as become employees of the transferee after the transfer.
(4C) The Secretary of State shall enter into consultations with the representatives of the trade unions and in the course of those consultations shall—
  1. (a) consider any representations made by the trade union representatives, and
  2. (b) reply to those representations, and, if he rejects any of those representations, give his reasons."
Government amendments to the proposed amendment: (a), leave out lines 1 to 5 and insert— '(4A) The Transfer of Undertakings (Protection of Employment Regulations 1981, in their application to the transfer of the dockyard undertaking or any part of it, shall have effect as if, for regulation 10 (duty to inform and consult trade union representatives), there Were substituted the provisions of subsections (4B) to (4D) below, and (unless the remedy provided by section (Failure to inform or consult trade unions: High Court and Court of Session remedies) is invoked) the remedies by way of complaint to a industrial tribunal provided for by, and the other provisions of, regulation 11 shall be available and shall apply in relation to those subsections as they would in relation to regulation 10 or any corresponding provision of it.'. (b), in line 8, leave out 'trade unions' and insert `independent trade unions recognised by him in respect of the employees'. (c), in line 9, after 'shall', insert 'in accordance with subsection (8) below,'.

(d), in line 14, leave out 'effected'.

(e), in line 15, leave out '(the Secretary of State)'.

(f), in line 17, after 'employees', insert 'or, if he envisages that no measures will be so taken, that fact'. (g), in line 18, leave out 'transferee envisages he (the transferee)' and insert 'company which is to become their employer envisages that it'. (h), in line 20, leave out from `to' to end of line 21 and insert 'those employees or, if the company envisages that no measures will be so taken, that fact. (4BB) The company which is to become their employer shall give to the Secretary of State such information at such a time as will enable him to perform the duty imposed on him by virtue of subsection (4B)(d) above.'. (i), in line 22, after 'State', insert ',where he envisages that he will, in connection with the transfer, be taking measures in relation to employees in respect of whom an independent trade union is recognised by him,'. (j), in line 28, at end insert— '(4D) If in any case there are special circumstances which render it not reasonably practicable for the Secretary of State to perform a duty imposed on him by subsection (4B) or (4C) above, he shall take all such steps towards performing that duty as are reasonably practicable in the circumstances.'. Consequential amendments to the Bill: (k), in page 2, line 13, leave out 'each employee' and insert 'the employees'.

(1), in page 3, line 19, at end insert— 'trade union" and "independent trade union" have the same meaning as in the Trade Union and Labour Relations Act 1974 and "recognised", in relation to an independent trade union, means recognised to any extent for the purpose of collective bargaining (within the meaning of the Employment Protection Act 1975); and any information which is to he given to the representatives of a trade union shall be delivered to them, or sent by post to an address notified by them to the employer, or sent by post to the union at the address of its head or main office.'. (m), new clause— Failure to inform or consult trade unions: High Court and Court of Session remedies— '(1) A trade union as respects which the Secretary of State has a duty under section 1(4B) or (4C) above to give information or enter into consultations may, where it alleges that the Secretary of State has failed to fulfil that duty, bring an action in the High Court for a declaration as to whether or not he has failed to fulfil that duty, and the Court may make a declaration accordingly. (2) In Scotland, a trade union as respects which the Secretary of State has a duty under section 1(4B) or (4C) above to give information or enter into consultations may, where it alleges that the Secretary of State has failed to fulfil that duty, raise an action in the Court of Session for a declarator as to whether or not he has failed to fulfil that duty, and the Court may make a declarator accordingly. (3) No proceedings may be brought under this section if a complaint to an industrial tribunal has been made under the provisions applied by section 1(4A) above.'.

4 am

Mr. Lee

You have said, Mr. Deputy Speaker, that we are to consider together Lords amendments Nos. 2 and 3 and all the Government amendments and consequential amendments to those two amendments. Since they all concern the same regulations it may be for the convenience of the House—particularly at this rather late hour—if I speak about all of them now.

Amendments Nos. 2 and 3 concern the Transfer of Undertakings (Protection of Employment) Regulations 1981. As the House will recall, these regulations are the implementation in domestic law of the European Community's acquired rights directive, and their main aim is to safeguard employees' rights when an undertaking is transferred from one employer to another. The sort of rights which are protected include continuity of employment, terms and conditions of service generally, collective agreements and trade union representation.

I should explain that the word "undertaking" is not itself defined in the acquired rights directive, but the 1981 regulations define it so as to exclude any undertaking which is not in the nature of a commercial venture". In Committee the right hon. Member for Llanelli (Mr. Davies) expressed doubts about whether, given that definition, the regulations would apply to the transfer of the dockyard employees. The Government's view has always been — and remains — that the dockyard undertaking is indeed an undertaking within the meaning of the regulations. The only doubt, in our view, was whether the transfer of the work force alone would be considered a transfer of part of an undertaking within the regulations. Clause 1(4) of this Bill was originally drafted to remove that one doubt.

When the Bill was considered in another place, doubt was again cast on the applicability of the 1981 regulations to the transfer of the dockyards. Although the Government's position on this had not changed, we took the view that the dockyard work force, which had been led by others to believe—wrongly in our view—that their conditions of service might not be protected, should be left in no doubt that the regulations would apply. The Government therefore decided to include in the Bill itself the statement that the regulations shall apply to the transfer of the dockyard undertaking or any part of it whether or not, apart from this provision, the undertaking would be treated as an undertaking in the nature of a commercial venture for the purposes of those regulations. As the Bill has passed through its various stages in this House and in another place it has become clear that all sides wish to ensure that the 1981 regulations will apply in this case. Amendment No. 2 puts it beyond argument that, as the Government have always maintained, the 1981 regulations will apply in the case of the transfer of the royal dockyards. I hope that the Opposition will welcome the amendment.

Mr. Denzil Davies

The hon. Gentleman said that there were doubts originally as to whether a transfer of the workers alone would come within TUPE '81, whether that was because of the commercial point or because there was no undertaking. Now the amendments are tabled to try to put that right. Will the Under-Secretary tell the House what extra is being transferred — the workers are still being transferred — in order to meet TUPE '81? Is anything else being transferred?

Mr. Lee

In a two-company situation, the managing company would hold the term contract for the provision of services and project contracts. The dockyard or employing company, which my right hon. Friend the Secretary of State would set up with a capital of £50,000, would have the work force and the licence to use the assets. On vesting day the dockyard company becomes the subsidiary company of the managing company. As we have said, our intention is to retain the ownership of the fixed assets without change. Nothing additional is passing in that sense.

Mr. Denzil Davies

The hon. Gentleman has now answered the question. Nothing additional is being passed. The transfer is still a transfer of the workers alone. How can we then say that TUPE '81 applies? Presumably, it is because, by a form of words, we have deemed it to apply, but nothing more is being transferred. I still think that the Minister has considerable problems.

Mr. Lee

If the right hon. Gentleman will let me finish covering Lords amendments Nos. 2 and 3, I shall refer to those points. I acknowledge that, as far as I am aware, nothing extra is being transferred.

The Government did not support Lords amendment No. 3 in another place. The amendment seeks to set out in the Bill particular provisions in the 1981 regulations. As it is clear that the regulations will apply in their entirety, there is no need to spell out in the Bill any individual regulation or any part of a regulation. These regulations are not there to be followed or ignored by the Government as they see fit. They are the law of the land and there is no question of our not complying with them.

It was not, however, only on a point of principle that the Government opposed the amendment, but also because it did not achieve its main aim of clarifying the Bill. The courts do not read the Official Report when interpreting legislation, and the Government have the duty to ask what a court would make of an Act which provides in one clause that the 1981 regulations will apply but then singles out one particular clause for special mention and provides specifically that that particular regulation is to be fulfilled. The provisions in the Bill, when enacted could well override the similar provisions in the regulations. That would give rise to problems with other parts of the regulations which refer to those provisions which might have been overridden by the Act. In short, there would be a statutory muddle.

Amendment No. 3 cannot, therefore, remain in the Bill in its present form, and to overcome the drafting problems, my noble Friend the Minister of State for Defence Procurement has had a number of discussions with representatives of both sides in another place. I am glad to say that they have said that they are content with the amendments that stand in my name — (a) to (m). These remove any doubts caused by the original wording and ensure that the amendments accurately reflect the wishes expressed in another place that the particular sections of the 1981 regulations relating to the duty imposed on an employer to inform and consult trade union representatives should be repeated in the Bill itself.

In the particular circumstances of the dockyards, it was argued in another place that the trade unions should be able to approach the High Court if, in the opinion of the unions, the Secretary of State had failed in his duty to inform or consult them, as necessary. The new clause which I have tabled, and which has been discussed with those concerned in another place, for consideration as a consequential amendment to the Bill, gives the relevant unions the right to bring an action in the High Court or, in Scotland, the Court of Session, for a declaration or a declarator respectively to that effect. Alternatively, the unions could make a complaint to an industrial tribunal, as provided for under regulation I1 of the 1981 regulations.

It is not, of course, for me, or indeed for this House, to anticipate the reactions of another place if these amendments have to be considered there again, but it is my hope that another place will not insist on its amendments and will accept the amendments which the Government now propose.

I should make clear that the need for compliance with the regulations in this and in all other respects has always been recognised in our plans for introducing commercial management to the royal dockyards by April 1987. No new obligations are imposed on the Ministry of Defence as a result of repeating in the Bill itself some of the provisions of the 1981 regulations, and our time scale remains unchanged.

What the amendment does—this was, I believe, the main intention of another place — is to highlight the need for consultation. The Government continue to hope for realistic discussions with the trade unions representing the work force at the dockyards. If the inclusion of this part of the regulations helps to bring this about, this amendment will have served some purpose. So that no one should be in any doubt, however, the amendment also refers, in words which echo the 1981 regulations, to the fact that if it is not reasonably practicable for the Secretary of State to consult—for example, because of a refusal on the part of the unions to take part in such consultations —it will be sufficient that he shall have taken all such steps to consult as are reasonably practicable in the circumstances. I hope that when the Bill has completed its parliamentary stages, the trade unions will start in earnest the process of consultations.

Mr. O'Neill

This group of amendments, which are primarily concerned with implementing TUPE '81 and seek to ensure that proper consultations take place, are long overdue. The consultation process relating to the contractorisation of the dockyards has had a chequered history. In paragraph 19 of its report dated 10 July 1985 the Select Committee on Defence said: The Committee accepts the view of a majority of witnesses that the time allowed for consultation was much too short. We further consider that the MOD's handling of the consultation process has been inept and insensitive. Tribute must be paid to Lord Denning for taking the relevant phrases and words out of TUPE '81 and enshrining them explicitly in this proposal.

We are still implacably opposed to the contractorisation concept, but we are not blind to the fact that the Government have a large majority and that they may have the legislation in the bag by the end of this week. Therefore, it is essential to establish appropriate means whereby the trade union movement can be consulted and, I hope, conciliated.

We are talking about a relatively short consultation period. The Select Committee on Defence appropriately condemned the Government for their failures on the last occasion. Therefore we hope that they will reconsider the timetable and the proposed date of 6 April 1987. TUPE '81 referred to the consultation period being long enough. Amendment (1) says that the information should be provided in writing. Adequate time should he given to enable the trade unions to respond in writing, and that might take a considerable time.

One notes the recent record of the Ministry of Defence on the amount of time and notice that it has given the trade unions over the manpower target consultation procedures. The manpower target for 1985 should have been notified to the trade unions in April 1984, but it was not notified to the unions until January 1985. The manpower target for 1986 should have been available in April 1985, but it was not available until August 1985. Despite the strictures of the Select Committee on Defence, the Ministry of Defence has a deplorable record over providing information and making it available to the trade unions in a form that they can handle and deal with quickly and effectively.

I am sure, Mr. Deputy Speaker, that you will remember from your previous incarnation as a Minister with responsibility for employment that consultation procedures on redundancy were made available to the unions. When there would have been redundancies involving more than 100 people, 90 days were allowed for consultations and discussions. In a letter to my hon. Friend the Member for Dunfermline, East (Mr. Brown) reference was made to the likelihood of even more redundancies because of the introduction of new work practices in the dockyards.

Perhaps the proposed consultative process is not new, but we are certainly led to believe that there has to be enough time and that adequate information has to be provided to discuss the legal, economic and social impact on employees. That makes it perfectly clear that at any stage the trade unions will be able to question the selection of a company. They can raise the matter of the legal status of the company and whether or not it has a sufficiency of British interest.

During the debate two firms with substantial American shareholdings were mentioned, and the trade unions could ask whether or not those shareholdings are consistent with undertakings already given. One might say that that is the first fence at which the Government could fall. By that I mean that the unions could if they wished apply to the High Court. In the case of the Court of Session I have been advised that a declarator ab ante could be applied for, and that would stop the Government in their tracks. It would not simply be a matter of the Government having to make a response, because it would enable the objectors to prevent the Government from carrying on with any of the other aspects of giving effect to the contract.

If that is the case, this could be a legal minefield for the Government. If it is not the case, the Under-Secretary's noble Friend in another place will have rather a difficult job convincing the noble Lords that the exercise they have gone through was worth while. In the words of the Government, substantial concessions have been made to the representations in another place. Is the Minister telling us that those substantial concessions will enable the whole consultative process to be carried through in three or four weeks? It seems that in the case of Devonport the period is getting shorter because we have already taken a month out of the process.

If the Minister intends that the result of this wretched Bill will be a consultative process lasting perhaps three or four weeks, he has another think coming, because he will find that difficult. If the trade unions are to fulfil their responsibilities to their members, they will need to take far longer than that. The record of the Ministry of Defence on consultations is not a good one. If the trade unions are not given sufficient time, we will see long legal wrangles on legality and on the economic and social impacts on the communities in Devonport and Rosyth.

These things are matters of interpretation and the courts will have to decide. We can only indicate what we consider to be the substance of this group of amendments. As I said earlier, Lord Denning has spelt that out in detail in his amendment and the Minister's amendment clearly shows that the unions will have a means of raising their misgivings.

As I understand it — perhaps the Minister can confirm my understanding—they will be able to do that only when the Government have finally chosen a contractor for each of the two yards. The process of consultation cannot start until the Government have chosen the contracting company.

Mr. Lee

indicated dissent.

Mr. O'Neill

The Minister is shaking his head and others will have to advise us what the outcome may be. But, as we understand it, the words are drawn in such a way that it will be only when the contractors have been selected that the process of consultation can start. If the Minister does not think that that is the case I can only say that trade unions will not waste their time entering into consultations about hypothetical firms which may or may not have plans for the contractual process. If he believes that the contractual process can somehow start as soon as the Bill receives the Royal Assent, he is living in a fool's paradise.

Labour Members know that that is a fool's paradise which he and his hon. Friends have constructed over the years and months that have preceded this evening. We do not wish the legislation well. We recognise that this is an improvement, in the sense that it affords workers clearer and more explicit rights than they have enjoyed before and remedies which we suspect they will have to exercise sooner rather than later on the whole question of consultation. We get the impression that, despite the negotiations and discussions that have taken place with another place, the Government, like the Bourbons, have learned nothing and forgotten nothing.

Dr. Owen

This is a much more important amendment. Indeed, like the hon. Member for Clackmannan (Mr. O'Neill), I think that it is important to congratulate the noble Lord, Lord Denning. It is important, too, to remember that Lord Denning was a Recorder of the city of Plymouth and that he has great affection for the city. Indeed, when he began to examine the legislation he started his memorandum by saying that he was on the side of the dockyard matey. I must say that I am, too. It is apparent that the Government have taken no notice whatever of the interests of the dockyard matey.

I do not want to embarrass the Minister, but on 16 July he wrote to the hon. Member for Clackmannan saying: I really do think that the amendment"— effectively the one that we have now— would be unwise from all our points of view. He went on to say: We could not go as far as adding Lord Denning's new point on the High Court"— but now on 24 July we suddenly have it.

The reason is that the Bill is under serious threat of not being able to meet its timetables. The Government fear that in another place they would not be able to sustain the Bill. The importance of this is that one would no longer be able to go through the industrial tribunal, but would have to go too the High Court.

First, let us be clear, that there is no doubt whatever that the consultations must be with the contracting party. There is no way that they can be with the Government. Take the case of Devonport and Mr. Johnston, the general manager of the dockyard there. Mr. Johnston, as general manager of the dockyard, cannot have a consultation wearing one hat, while in another hat he is putting his application in to be the contractor who will be the commercial organisation who will employ those people. There is no way that the High Court will accept that Mr. Johnston is capable of conducting negotiations under two hats. There is no question that the wording of the amendment means that the consultations will have to come after the tenders have been taken and the contracts awarded.

The Government may think that they will now have a generalised consultation with the dear old Ministry of Defence, that that will meet the book and that there will be no other questions, but that will be challenged in the High Court. They have not got a prayer. The whole purpose of the consultations is that the contracting parties are in effect making arrangements under the terms of this new legislation. The importance of that is that the Government cannot possibly meet any of the deadlines. I do not know whether the Minister in accepting the amendment knows that. I suspect that he does, and that he is getting his legislation and saving the face of the former Secretary of State, the right hon. Member for Henley (Mr. Heseltine). The latter has landed us all in the cart with this ludicrous legislation. The Minister will then, I hope, announce shortly that he is going for a Government plc. I hope that he also does the same for Rosyth. There is no possibility of going ahead in Devonport, unless the Minister wants to face an action in the High Court. I understand that there is every intention to take the matter to the High Court.

There was one marvellous moment in the Minister's speech when he implied that there was a great tradition of Ministry of Defence consultation. That is just a joke. There has been no consultation on this legislation. The lack of consultation has been criticised by the all-party Select Committees, all of which have looked at the matter. During the process of this legislation great damage has been done to the word consultation. No one in the dockyard believes that the Minister has ever been consulted seriously. The Minister should be under no illusion. As a result of the new clause, proper consultation on the Bill will be forced. It will be consultation with the contracting party,. and things are likely to go to the High Court. There is no way that this legislation can now be squeezed in without the contractor facing the certainty of legal action, with all the costs and delay that that will involve. The amendment is, therefore, important, and I congratulate Lord Denning, former Master of the Rolls, on being so effective.

Mr. Gordon Brown

There are good reasons why the House should not be detained to consider these amendments, hut, like other hon. Members, I do not believe that the Minister appreciates the seriousness or importance of the amendments passed in the other place.

The Minister does not seem to appreciate the full extent of the duty that is placed on him and his Department in respect of consultation. The amendments passed in the other place, which have been refined before being brought before us, call for a process of consultation. They call, not just for a meeting here and there, but for a process of continuous consultation. They also state that that consultation must take place long before the transfer of the dockyards to private contractors. The amendments also make it clear that that consultation must involve the transfer of information in a written form and that the Government must await the response of the trade unions and the workers' representatives to their information.

Above all, the amendments make it clear that the consultation is about the biggest questions as they affect employees —the legal, economic and social implications of any transfer of the dockyard management to the private sector. The legal, social and economic consequences involve everything affecting the individual employees and the collective group of them at Rosyth and Devonport. The Government will have to be honest about the likely job losses as a result of the transfer, and about the threat to apprenticeships. They must explain what is likely to happen to the local economies in those dockyard areas, and they must also explain in detail what is likely to happen to the rights of individual employees, and of employees as trade union members.

Having read the reports of the debates in another place, I cannot understand how the Minister can say that his timetable remains entirely unchanged. It is worse than that, because he has told us that his timetable has slipped for tenders coming into his office. That means that there will be less time for consultation on the tenders and on what any preferred contractor is to do. The Minister insists, however, that he will transfer the dockyards to the private sector in April 1987.

4.30 pm

The position is even worse than that, because the Minister has told us bluntly that he intends that the private contractors shall be in the dockyards in December. In 1985, when the Ministry of Defence announced its first timetable for the transfer to the private sector, it hinted that there would be a period of parallel running with a private contractor and the Ministry of Defence from the spring of 1987. However, the Minister has confirmed that it is intended that the period of parallel running will begin in December.

In one sense, the transfer will take place in December, although the formal vesting day will be April 1987. The Minister leaves us with the possibility that he will make a decision about a private contractor, the preferred contractor, in November, and that the contractor will be in each yard in December.

The Ministry's record on consultation over this entire business is pathetic and shabby. That has been said by the right hon. Member for Plymouth, Devonport (Dr. Owen) and by my hon. Friend the Member for Clackmannan (Mr. O'Neill), and my hon. Friend drew attention to what the Select Committee on Defence had said about previous consultations. Having issued a consultative document, the Ministry tried to complete the consultation within 13 weeks. The Select Committee took the view that it was not serious about consultation and claimed that through their handling of the consultation process the Government had forfeited much of the good will that might have been forthcoming for any attempt to secure a long-term future for the yard. Having received a severe and serious rebuke from the Select Committee, I would have thought the Minister would learn from the mistakes that had been made and construct a timetable, with or without the amendment that has been introduced by Lord Denning, that would allow for proper consultation.

I shall give the Minister one example of the problem that he faces, and I hope that he will explain how he will overcome it. Amendment No. 3 says that the Secretary of State must inform the representatives of the trade unions long enough before the transfer about the measures which the transferee envisages he … will, in connection with the transfer, take in relation to such of those employees as become employees of the transferee after the transfer. That is a detailed requirement that is placed on the Secretary of State. It is a period of consultation within which information must be exchanged between the trade unions and the Government, and they must be given time to respond.

For that period of consultation to begin, there must be a transferee and a nominated contractor. There must be someone who has been nominated as the contractor to take over Devonport, and someone else who has likewise been nominated to take over Rosyth. The Minister tells us, however, that he will not be in a position to make an announcement until the middle, or towards the end, of November. That period of consultation cannot begin until the announcement is made, and I hope that if he is going ahead with the transfer the announcement will be made at the first instance.

Towards the end of November the Minister will announce the contractor who will take over the dockyard, and he proposes that the contractor will be inside the yard and working at the beginning of December. The period of consultation on the implications of the transfer will probably be about three or four days, and the maximum of 10 days. Does the Minister ask us seriously to accept that that is a long enough period for consultation to allow all the legal, social and economic implications of what he is doing to be understood? There is no doubt in my mind, and the minds of all Opposition Members, I think, that the Minister plans to effect part of the transfer by the beginning of December. It is an unacceptable timetable, and quite the worst possible circumstances in which to expect reasonable consultation. I can hardly believe that letters could be delivered and exchanged within the time, far less that serious consultation can take place.

There is one other problem that the Minister has to resolve. The Secretry of State for Scotland wrote me a letter on 16 July, in which there was a new announcement of Government policy affecting the Ministry of Defence, but announced by the Secretary of State for Scotland. He said that there were potential reductions in the numbers of people required in Rosyth and Devonport dockyards, and that it had been known for some time that the defence work load available to Rosyth and Devonport would decline. Although some of the unallocated programme may go to Devonport and Rosyth as a result of the changes, and perhaps also some additional commercial work, the implication of the letter is that that could do nothing more than offset some of the job losses that have for some time been a possibility.

The Ministry of Defence talks about how serious it is about consultation. A policy has been announced in a letter from the Secretary of State for Scotland that the defence work load at Rosyth will decline. The Minister has never consulted the trade unions on that nor previously informed Members of Parliament during 70 hours of Committee work on the Bill. An assumption that there will be job losses is written into the letter. There was a lack of consultation with the trades unions before the Secretary of State for Scotland—not the Ministry of Defence —announced that to me in a letter. It seems that the Minister has learnt nothing from the period of discussion and debate, which has been fraught with so many difficulties and criticisms from such a wideranging group of people about the Minister's failure to consult.

If the Minister does not change his timetable, he faces not only one court action in either the Court of Session in Scotland or courts in England, but a series of court actions on a range of different issues, which will make the life of the Ministry of Defence intolerable and mean that the fate of the dockyards will be decided in the courts of law instead of where it should properly be decided, in the House, after proper consultation with the trade unions.

We have said all along that the Bill and its proposals are bad for the taxpayer because they will cost more; that they are bad for the work force because they will mean redundancies and deteriorating conditions of service; and that they are bad for the proper defences of the country. Under the Minister's new announcement, the running of the dockyards may be put in the hands of yet another foreign company. It is equally bad that the Minister is prepared to accept Lord Denning's amendment — I praise his work in another place — in theory, but in practice will do nothing to make a reality of the consultation that he promises. He is therefore treating the work force and the trades unions with contempt. If he does not change his mind over the next few weeks, he will face a series of legal actions in the courts that will force him to climb down. I wish that he would be honest with the House and say that his timetable has to change and that his Bill has no chance of being implemented before a general election, which should properly decide the issue in the constituency that I represent.

4.38 am Sitting suspended.

4.50 am On resuming—

Mr. Douglas

I shall be brief, but not because the amendment is not important.

Others have paid tribute to Lord Denning. He has drawn attention to consultation and revealed what we did not previously know about the Government in that regard. They have laid on a veneer of consultation, but tried to drive through their views, which have been essentially those of the right hon. Member for Henley (Mr. Heseltine). They have tried to convince the work force that the option that they always had in mind was the realistic one.

The Select Committee on Defence drew attention to the farce of consultation in two unanimous reports, the Government's responses to which were pretty pithy. Nobody could have had any faith that the Government's consultation process was meaningful. We know that the Government intend to attack fairly severely the load on dockyards, and to reduce the naval load from 80 per cent. to 70 per cent. Unless there is some other work about which we know nothing, that represents an attack on and an undermining of the work force.

The Government acknowledge—my hon. Friend the Member for Dunfermline, East (Mr. Brown) mentioned the Secretary of State for Scotland's letter — that the naval ships that are being developed and built will require less manpower than earlier ones. That also will entail a reduction in the work force. The Government tell the Select Committee and the Public Accounts Committee that they will achieve a saving. They will quantify the saving in money terms, but not in employment terms.

Perhaps the Minister will tell us how there will be a reduction in the load factor, a change of quality, a saving and, more important, what will happen to the labour force. The Minister has an obligation to the communities that will be affected to come clean. Communities can make adjustments to employment changes in time. In Fife, we have had to make enormous adjustments to the decline in the mining labour force. Unfortunately, that process continues, but communities can adjust if they are given time and proper Government support.

All those factors are missing in the legislation. I shall not plead that we should employ people in the dockyards because it is a socially worthy thing to do, but the dockyards are in the public domain and the Government employ those people, so there is an overwhelming obligation on the House to ensure that the Government discharge their duties responsibly.

The Defence Select Committee unanimously criticised the Government for a lack of consultation and unanimously cast doubts on the measure. Government expect the Opposition to oppose and criticise legislation, but legislation with any merit will gather friends and support during its passage. At each stage, this paltry four-clause Bill has had fewer friends. There is no supporter from any dockyard community on the Government Benches. I know that the hon. Member for Plymouth, Drake (Miss Fookes) has difficulties because she is a member of the Chairman's Panel.

I plead with the Minister, if he cannot scrap the proposals, at least to declare that the Government's intention is to opt for a Government-owned plc — I would prefer no change—and to see that the timetable for consultation is adhered to meaningfully and discussed with an extremely loyal labour force which has brought benefit to the nation.

Mr. Lee

No one would welcome a lengthy reply, but I must make some brief points.

We are and have been ready to consult since April 1985. Contractor selection will be completed by late November and consultation will continue through to vesting day. As I said in relation to the timetable which I set out earlier, we are talking about a full four months between the selection of the contractor for the particular yards and the date of 6 April when commercial management begins.

We have provided alternative procedures by which a union may allege that my right hon. Friend the Secretary of State has failed in his obligation to inform or consult. My Department will continue to spare no effort to comply with what will be its statutory obligations. For that reason, we are confident that proceedings alleging a failure to inform or consult will be bound to fail, whether they are commenced in an industrial tribunal, the High Court or the Court of Session. At an industrial tribunal, a union may seek a declaration under regulation 11 of the 1981 regulations that my right hon. Friend the Secretary of State has failed to inform or consult. If that allegation is well founded, the tribunal will make a declaration to that effect, and if appropriate, order the payment of compensation to affected employees of up to two weeks' pay. A tribunal's declaration would not vitiate the effectiveness in law of a transfer. An appeal from an industrial tribunal would lie on a point of law to an employment appeal tribunal and thereafter, with leave, an appeal would be taken to the Court of Appeal or, in Scotland, to the Court of Session.

The Bill will now also provide for an alternative procedure for establishing a failure to fulfil statutory obligations. A union will have to choose. It could not begin in the High Court and then decide to go to an industrial tribunal; the procedures are mutually exclusive. The High Court can make a declaration as to whether or not the Secretary of State has failed to fulfil his duty to inform or consult. In Scotland the Court of Session may make a declarator to the same effect. The alternative procedure would not allow the High Court or Court of Session to set aside the transfer of the dockyard undertaking at either dockyard authorised by the Secretary of State.

Mr. O'Neill

The courts cannot stop the process of transfer, but they can freeze it until such time as the consultations are properly conducted. That could seriously delay the programme that we consider to be far too short. That is the significant change from Lord Denning's suggestion.

Mr. Lee

That is the hon. Gentleman's judgment. It is not mine, the Government's or Ministers'. We have every intention of bringing in commercial management by 6 April 1987.

Question put and agreed to.

Lords amendment No. 2, as amended, agreed to. Government amendments (a) to (j) to Lords amendment No. 3 agreed to.

Lords amendment No. 3, as amended, agreed to.

Consequential Government amendments (k) to (m) agreed to.

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