Devonport Dockyard (Hansard, 24 February 1987)

§ The Secretary of State for Defence (Mr. George Younger)
With permission,Mr. Speaker, I would like to make a statement about Devonport dockyard.
As the House will recall, I announced on 20 January that I was satisfied that there existed the basis for an advantageous contract to be placed for the future operation of Devonport dockyard with Devonport Management Ltd. At the same time, we provided the trade unions with further information summarising the main aspects of the draft contract arrangements negotiated with that company. In a statement made on 21 January my hon. Friend the Parliamentary Under-Secretary of State for Defence Procurement informed the House that I had invited the trade unions to a meeting on 13 February so that I might hear and consider their views before taking any final decision on the future management of Devonport dockyard.
At the time of that statement the Devonport Management Ltd. consortium comprised Brown and Root (UK) Ltd. with 30 per cent. of the shares, the Weir Group plc with 25 per cent. and Barclays de Zoete Wedd with 45 per cent. As the House knows, it has been our hope that some or all of the 45 per cent. held by Barclays might be transferred to one or more British industrial companies. I am glad to inform the House that since my hon. Friend's statement BICC, acting through its subsidiary Balfour Beatty, has now joined the consortium. BICC, Brown and Root and the Weir Group now each holds 29.9 per cent. of the shares with the 10.3 per cent. balance held by Barclays de Zoete Wedd, in trust to provide an incentive scheme for key employees.
I met general secretaries and other trade union representatives on 13 February to discuss the way ahead on Devonport. The unions made it clear to us that they remained as opposed as they have always been to the introduction of commercial management, continuing to prefer the idea of a dockyard trading fund with the work force remaining in the Civil Service. As I have already told the House, it remains our view that a dockyard trading fund, which is the option involving minimum change, is unlikely to secure the improvements in efficiency we seek or to compete as successfully as a commercial company for commercial and naval non-core work.
We have provided a great deal of information to the unions on our proposed changes to the management of the dockyards, over a very long period. I am grateful to the unions for the work they have done in recent weeks to consult the work force locally. I have considered closely the points they have put to me. These have included the request for the contract which we have already signed in respect of Rosyth dockyard, and the one we have negotiated with Devonport Management Ltd., to be made public; but I am sure that the House will understand the reasons of commercial confidentiality that prevent me from meeting this request. However, I have made every effort to provide all the relevant information that I can.
I am fully aware of my obligations to inform and consult the trade unions and I am satisfied that I have complied with such duties as the Act imposed on me at this stage. I have, therefore, authorised the signature today of a seven-year-term contract for the future operation of Devonport dockyard from 6 April 1987 with Devonport 140 Management Ltd. We are also signing a service contract with the company to cover its operations in the dockyard from now until vesting day, during which time the management of the dockyard will remain the responsibility of my Department.
I have renewed my invitation to the trades unions to devote the period between now and vesting day to useful discussions on matters affecting the work force and have proposed a series of meetings to that end.

§ Mr. Denzil Davies (Llanelli)
This statement again demonstrates that the Government had no intention of changing their original decision to privatise the dockyards. All the talk about consultation, frankly, was a sham. As all the independent and outside evidence has shown, there is no reason why the dockyards cannot be run commercially and efficiently by means of a trading fund, as in the case of other companies, within the public sector. We believe that these changes will lead to lower efficiency, a lower standard of service for the Royal Navy, and ultimately a higher cost to the taxpayer.
The House will remember that the Government have now destroyed four dockyards. First, there was Chatham, which has closed. The naval dockyard in Gibraltar was the second. Then Portsmouth was relegated from a dockyard to a fleet maintenance base. Now we have the destruction of Devonport and Rosyth. That does not augur very well for the future of the Royal Navy and the services provided for it.
Could the right hon. Gentleman confirm that the lead company in all this will be Brown and Root, a foreign-owned subsidiary, and could he tell the House what expertise and experience Brown and Root has in operating dockyards of this kind? Could he also confirm that, as is widely believed, the change will lead to a lowering of engineering standards and also to at least 5,000 redundancies at Devonport?
Who are the key employees who are apparently to be provided with an incentive scheme? Why not such an incentive scheme for all the employees at Devonport?

§ Mr. Younger
The right hon. Gentleman really must appreciate that the objective of all the consultations that I have been having over recent weeks with such great care and consideration has been to find out whether there were any good reasons to assume that one of the alternatives to what I have announced today would be better for the future of the dockyard. The only criterion in my mind in assessing these has been that which would give the dockyards, in this case Devonport dockyard, the best opportunity to operate successfully and to get more business for those who are working in the yards. With great respect to the right hon. Gentleman, I really think that those who will work in this yard for many years in the future will be somewhat depressed to hear him today talking about the destruction of the yards, which is so remote from the truth that it makes what he says quite absurd.
I thought that the right hon. Gentleman would know that Brown and Root has very wide experience of engineering work both in the United States and in this country. There is certainly no reason whatever to think that its standards will be lowered.
With regard to employment, I have expressed the opinion that in the worst case, if the dockyards remained under the present management, there might be 5,000 141 redundancies over the next 10 years. I understand that the new managers who are being appointed today expect about 2,300 redundancies over the next four years, which is at least a rather better outcome than we had feared. I certainly think that this company has the capacity to run the dockyard extremely successfully and to get new business into it, and that is the greatest security that those who work there could possibly have.

§ Miss Janet Fookes (Plymouth, Drake)
I wish first to dissociate myself from the very gloomy interpretation of events described by the official spokesman for the Opposition. Secondly, I express my pleasure that a place has been found in the new arrangements for the present managing director, Mr. David Johnston, and at the same time inquire whether places will be found for the other senior managers who form the non-winning consortium.
Thirdly, will my right hon. Friend explain in more detail what the precise arrangements are for the service contract between now and vesting day, and what that will involve?

§ Mr. Younger
I am grateful to my hon. Friend. I entirely agree that it is most unhelpful to talk inaccurately about the destruction of the dockyard when this is the best opportunity that we can give to those who work there for a better and secure future.
My hon. Friend asked about the people who have been working as managers in the dockyards and, in particular, about Mr. Johnston. I understand that most of those who were in the consortium with Mr. Johnson are likely to continue in employment with the new company, although probably not all. I expect the new management to attain high standards. The understanding that we shall work with it during the interim period will enable it progressively to move in to take over management, but until vesting day responsibility will rest with my Department.

§ Dr. David Owen (Plymouth, Devonport)
How does the Secretary of State justify restricting shares in the new commercial enterprise to key employees only? In view of the fact that the commercial management has been criticised not only by the unions but by distinguished industrialists, managers throughout the country, two all-party Select Committees, all three Opposition parties and the local and district councils, will he not at least take into account the fact that this decision will be reversed and that a unified, integrated commercial enterprise will be established in Devonport dockyard with share ownership open to all employees?

§ Mr. Younger
I note what the right hon. Gentleman says and know from his close contacts locally that he will be anxious to know what the future arrangements can be. At this stage the shareholding system that has been set up offers the best opportunity for good, sound management of the company. However, I note what the right hon. Gentleman says, and no doubt it can be considered.

§ Mr. Robert Hicks (Cornwall, South-East)
In view of the consequences for employment opportunities in the area arising in part from the decision to alter the system of management, can my right hon. Friend say what tangible assistance his Department will make available, in addition to that provided by the Department of Employment and the Department of Trade and Industry, to alleviate those adverse affects and to promote the introduction of new suitable industry into the area, thus diversifying the local economy?

§ Mr. Younger
I am grateful to my hon. Friend. The decision that I have announced today does not in any way obviate or remove the obligations that my Department and I have to do all we can to help all aspects of the changeover, including giving any help that can be given from parts of the old dock yard which may no longer be required in the new set-up. I do not regard our responsibilities for that as ending with the new regime. I hope that my hon. Friend and those who are employed in the dockyard will recognise that, while the new system of management will come in on vesting day, 6 April, that does not end my Department's interest in the dockyard, nor our responsibility to supervise what goes on there.

§ Mr. Dick Douglas (Dunfermline, West)
Will the Secretary of State reflect on what he has been saying about commercial confidence in relation to the contracts? While it may be acceptable to acknowledge that certain aspects of confidentiality must be adhered to prior to signing the contract, there is no overwhelming reason to keep these contracts strictly secret now that they have been signed. Why cannot the trade unions see the terms and conditions that the Secretary of State has accepted with these companies? Who will be the boss at Devonport? If the existing personnel and expertise are retained, who will administer the yard? Who signed the contract with the Ministry of Defence and—

§ Mr. Speaker
Briefly.

§ Mr. Douglas
Yes, Mr. Speaker. What was the nationality of the individual who signed the contract with the Ministry of Defence? May we have a complete assurance that at Rosyth the apprentice numbers that we have been led to expect in the past year will be maintained and not diminished, as we heard in previous answers?

§ Mr. Younger
I understand the hon. Gentleman's desire for more information. However, if he reflects about the contracts and thinks a little further about them. he will appreciate that when two separate contracts with different companies in different dockyards are negotiated simultaneously it would not be fair to either of the parties if the precise terms, conditions and details of one became common knowledge to the other.
If the hon. Gentleman thinks further ahead, after the seven-year period there may be a renegotiation of the contract or even a new contract with a new consortium and it would not be right for the precise details of the previous contract to have been known publicly.
The trade unions have had a huge amount of information passed to them for more than two years, and a great deal of which, I fear, has not been adequately digested. They have plenty to go on with all of that.
The boss will be the managing director of the new company that is to run the consortium that will take over.
Apprentices at Rosyth have been the subject of a statement by the new company. If more information is required, the unions would be well advised to break what they previously regarded as their blockage on discussions with the new company because, with great respect to the unions, that would be valuable to them and their members.

§ Mr. Robin Maxwell-Hyslop (Tiverton)
Has my right hon. Friend noticed the absence of all the Liberal Members from the House? Does he agree that that suggests that they are entirely satisfied with the decision 143 that he has reached? Does he further agree that, as there is only one SDP Member present, presumably the other SDP Members are also satisfied with the decision?
As the volume of naval orders does not depend on the decision announced today, will not employment in the dockyard depend wholly on the ability of the winners of the competition to attract overseas repair orders? Does my right hon. Friend agree that world-wide experience is the best warranty that there could ever be for future employment in Devonport dockyard?

§ Mr. Younger
I thoroughly agree with my hon. Friend's last point. There is no doubt that the level of work in the dockyard, under any form of management, including under the present management, depends on the yard becoming more competitive and able to acquire business other than normal naval dockyard work. I am absolutely clear that the new arrangement with the commercial consortium is much the best way of giving the yard the best chance to obtain new work. However, I do not wholly agree with my hon. Friend's theory that, because Liberal Members are not in the Chamber, they agree with everything that has been done. If that were so, they would be the happiest Members of the House by a long way.

§ Mr. Michael Foot (Blaenau Gwent)
If this wretched plan goes through, despite opposition from all the independent bodies that have considered it, will the Secretary of State confirm that the assurance on control of future employment in the yard will be taken from the Government and transferred to the company—and that the guarantees that the Government have given about employment in the yards are of no use or worth?

§ Mr. Younger
That is a fair point. When the new employers take over the management of the yard, the employees will be responsible to their new bosses for doing their jobs properly and for negotiating any changes that they may wish in their conditions of service. However, on vesting day, their present rights and conditions will be carried through. That is fair treatment for those transferring to a new employer. The Minister of Defence will retain an interest as being responsible overall for the dockyard, subject to the contractors.

§ Mr. Jonathan Sayeed (Bristol, East)
Does my right hon. Friend know that the one interested party that Opposition Members have neglected to mention is the Royal Navy? Will he confirm that the Royal Navy greatly favours his plans for Devonport?

§ Mr. Younger
My hon. Friend is correct. I understand that the trade unions had a meeting with the Navy Board, asked that question, and were told that the board was absolutely clear that this was the right policy.

§ Mr. Willie W. Hamilton (Fife, Central)
In the light of the information supplied, does the Secretary of State accept that Brown and Root is a company of complete honesty and integrity? As the right hon. Gentleman has estimated that thousands of jobs will be lost, does that not add to the importance of accepting my Bill for the establishment of a development agency for the south-west of England?

§ Mr. Younger
The hon. Gentleman would not expect me to comment on a south-west England development agency. That is not a matter for me to decide. However, 144 I can confirm that I have no reason to think that Brown and Root is not an entirely honest firm with integrity. It has operated, as he should know, for a long time in Scotland and has provided a great many jobs there.

§ Mr. Gordon Brown (Dunfermline, East)
Will the Secretary of State now admit that he cannot conduct and complete the remaining consultations on conditions of service, pensions and the social and economic consequences of what he is doing and still meet his proposed deadline for transfer, which is only five weeks and a few days from now? Will he take note of the advice from my hon. Friend the Member for Dunfermline, West ( Mr. Douglas) and publish all those details of what I understand are 1,000-page contracts involving jobs, apprenticeships, work load and reserve powers available to the Ministry of Defence so that we can see for ourselves the surrender of British interests and the unpatriotic betrayal of the work forces involved in this pernicious statement?

§ Mr. Younger
The hon. Gentleman is wrong about the amount still to be discussed. I remain ready to discuss solidly with all concerned between now and vesting day, and indeed beyond if necessary, any points that they wish to discuss. The conditions of service for the employees will be carried through to the new employment, and it is thereafter for them to negotiate any changes that they wish with their new employer. That is a perfectly fair treatment.
Some amendments will have to be made to conditions to recognise the changeover. Those can easily be discussed, and I remain ready to discuss them at any time. The position is, I am sorry to say, that repeated suggestions of dates for meetings to discuss those matters further have been turned down by the unions. I hope that they will now appreciate, in the interests of their members, that they should discuss much more fully all the details with me and my representatives and with the potential contractors at both dockyards. They have plenty of information upon which to work.

§ Mr. Dennis Skinner (Bolsover)
Did the Secretary of State hear my right hon. Friend the Member for Llanelli (Mr. Davies) ask who were the key personnel? Is it not important that we know who those people are and what influence they will have? Is it not somewhat ironic that the flag-waving Tory party, represented by the Secretary of State today, is prepared to allow international money, say, from Libya or Argentina to be invested in this defence area while, at the same time, many British workers who are not key personnel will not be allowed to play a part in it? I think that the Secretary of State must answer that question.

§ Mr. Younger
On the matter of hearing what was said, my only problem in hearing is usually the hon. Gentleman's sedentary speech which goes on throughout the proceedings. It is for the new management to discuss key personnel with the unions, no doubt, and with representatives of the work force if they wish, on how that scheme can best be put forward. That is much the most sensible way to proceed.

§ Mr. Sydney Bidwell (Ealing, Southall)
How can the Secretary of State be sure that there will be no greater security risk as a result of this widespread involvement in the docklands area? In view of the growing sophistication of armoury of the Navy and other forces, how can he be sure that there is not a grave security risk?

§ Mr. Younger
There are two points worth making in connection with that question, which is a perfectly fair one. First, all the security conditions and security arrangements that apply at the present will apply in the future. All that will have changed is the precise form of the management. I remind the hon. Gentleman and the other Labour Members who have expressed doubts of the structure of the management company that I have announced today. Certainly 29.9 per cent. of the shareholding is held by Brown and Root, whose parent company is an American company, but BICC has 29.9 per cent. and the Weir Group has 29.9 per cent. Barclays de Zoete Wedd has just over 10 per cent. That is a clear security for anyone who feels that there is foreign ownership of the dockyard. There is clearly a large majority shareholding of non-foreign ownership, for what that is worth. I expect all of those companies to be dedicated to the success of the dockyard under its new management.

§ Mr. Martin J. O'Neill (Clackmannan)
Will the Secretary of State please be more specific about what he thinks the outcome will be in relation to key employees? Will those be people who are at present in the employ of the Ministry of Defence or are they likely to be Brown and Root placemen in the new organisation? Would it not be more sensible to make the terms of the contract clear and explicit so that employees could decide whether they wished to participate in the incentive scheme and so that people are not asked to take a pig in a poke, as the British Navy is having to do in this wretched business?

§ Mr. Younger
No, the British Navy is not taking any pig in a poke; it is taking an alternative form of management which should have a better chance of making a success of the dockyard. Of course, the key personnel could come from those presently employed in the dockyard and they could also come from outside. It should be an advantage for the future management of the dockyard to obtain the best talents from either of those two sections. The details of the scheme should be negotiated between the unions and representatives of the work force and the new management.