Devonport Dockyard

HC Deb 21 January 1987 vol 108 cc891-6 3.32 pm

The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Archie Hamilton)

With permission, Mr. Speaker, I should like to make a statement on the Devonport dockyard.

My right hon. Friend the Secretary of State announced yesterday, in following up an answer to a question from my hon. Friend the Member for South Ribble (Mr. Atkins), that the Government are now satisfied that there exists the basis for an advantageous contract to be placed for the future operation of Devonport dockyard with Devonport Management Limited, which is a company formed by Brown and Root (UK) Limited, the Weir Group plc and Barclays de Zoete Wedd Ltd. I am sorry that the Official Report has not yet printed my right hon. Friend's answer. However, I did write yesterday to those Members most concerned.

All three companies in the consortium are British, but Brown and Root is a United Kingdom subsidiary of the United States Halliburton company. As the hon. Member for Clackmannan (Mr. O'Neill) will recall from our discussions of the Dockyard Services Bill, the upper limit which we set for foreign shareholding in the companies bidding for the contracts was 30 per cent. In determining whether a particular shareholding should be considered foreign, account is taken of the parent companies. On that basis, Brown and Root's share in Devonport Management Ltd. has been set at 30 per cent.

The House will recall that, in our paper to the trade unions of 4 December, we announced our preferred contractor for Rosyth. My right hon. Friend is at this moment chairing a meeting with general secretaries of eight unions to hear their views on that paper, before he takes a final decision.

In forwarding the paper on Devonport to the unions yesterday, my right hon. Friend proposed a meeting with them on 13 February to discuss that paper. No contract has yet been placed, and my right hon. Friend has said that he will do so only when the unions have had an opportunity to give him their views.

Mr. Martin J. O'Neill (Clackmannan)

I am grateful to the Minister for making that statement. I wish that he had been able to do so for Rosyth as well when the occasion arose. However, we are disappointed—and I am sure I speak not only for Opposition Members but for the people of Devonport, who I imagine will not be represented here this afternoon. None of us is convinced by any of the claims made by the Government on the future of the dockyards. Will the Minister confirm the story in the Western Mail this morning that the number of redundancies likely to follow the change of contractor will be about 4,000?

Will the Minister further confirm that, although Brown and Root has only a 30 per cent. share, that is the highest possible share that it could have, given that it is American-owned, and that its secondary position in the consortium is little better than a financial fiction, as everyone knows that it will be the lead in the contractor consortium? Will the hon. Gentleman elucidate and give some information on why the Lazard group withdrew at the last possible minute—only yesterday morning—from the consortium, and was replaced by Barclays de Zoete Wedd?

Does the Minister recognise that the work force at Devonport will be angered almost beyond belief by that American takeover of their yard, and that those are loyal men, who have served their Queen and country for decades, and who resent being reduced to the level of chattel slaves, to be handed over to the Americans? That is what the transfer of undertakings involves. It is the selling of the work force; it is nothing more nor less than that. It will be opposed, as it has been throughout the campaign by both the work force and Opposition Members.

Mr. Hamilton

I shall deal first with the withdrawal of Lazard from the consortium. That must be the concern of the consortium—it must be up to the consortium to decide who its financial backers are. However, there have been changes in the make-up of all the different consortia that have been bidding for the contract.

On foreign control, as I said, we set the level of foreign shareholding for companies bidding for the dockyard contract at 30 per cent. If a foreign shareholding exceeds that level, my right hon. Friend the Secretary of State will have the power, under the contract, to act where circumstances are contrary to the essential interests of security. My right hon. Friend could terminate the contract if he felt that to be necessary. However, we do not say that a 29 per cent. shareholding would be acceptable in all cases or that a 31 per cent. shareholding would be unacceptable. We can think of examples where even a tiny foreign shareholding would be unacceptable and where a shareholding above 30 per cent. would be acceptable.

Protection of security has always been and always will be a paramount consideration. Devonport Management Ltd is a list X company. That means that, in order to undertake classified defence work, the company has to satisfy the Government's stringent security, physical and personnel requirements, which have existed under successive Governments. There are, of course, many foreign firms that satisfy the Government's security rules.

On manpower levels, in the paper that we issued on the Government-owned plc option in September, we said that, under that option, there were likely to be reductions over a seven-year period of some 5,000 jobs in Devonport and 1,200 jobs in Rosyth. Obviously, those calculations were based on assumptions about possible improvements in efficiency and on forecasts of the amount of unallocated naval and commercial work that the company might secure. It is of significance that the preferred contractors at Devonport believe that, under their management, reductions will be measurably less.

Mr. Keith Speed (Ashford)

My hon. Friend will be aware that under the Admiral Rickover rules, non-United States citizens are not allowed to have any contact with United States navy nuclear propulsion systems. Is it correct that under the contractual arrangements that my hon. Friend has announced, there is a possibility that not only United States companies but United States citizens will be relating directly to our nuclear propulsion systems, and the SSN refitting capability at Devonport dockyard, and thus will be at a considerable advantage from a defence and commercial point of view compared with United Kingdom citizens and the United States nuclear propulsion system, with which we are not allowed to have any interface at all?

Mr. Hamilton

United States personnel might be involved, but they would be security cleared.

Mr. John Cartwright (Woolwich)

Will the Minister assure the House that the proposed vesting date of I April for the takeover by the new contractors is not set in stone? If, as seems highly unlikely, all the complicated transitional arrangements are completed by that date, will the hon. Gentleman assure the House that he will delay the takeover until all the problems can he properly sorted out?

Mr. Hamilton

I can assure the hon. Gentleman that the vesting day is 6 April. We have every hope of being able to meet that date.

Sir Peter Emery (Honiton)

Will my hon. Friend assure the House that the major concern of Her Majesty's Government is the essential and successful future operation of the dockyard in relation to the work that has to be carried out? If that is the case, has not Brown and Root played a major part in other British developments, particularly in the North sea? It is an expert in this area. Can my hon. Friend give an assurance that, when considering the future work force, those who are already employed will be given, as far as possible, first preference for the jobs that have to be filled?

Mr. Hamilton

Yes, of course I can give my hon. Friend that assurance. It is quite true that Brown and Root is bringing in great expertise from outside. If we consider the development of the oil potential of the western approaches, I am sure that this will be of enormous benefit to Devonport. It will remain the most important dockyard dealing with Royal Navy refits, which still remain an absolutely essential part of our capacity to keep our ships afloat.

Mr. Michael Foot (Blaenau Gwent)

Will the hon. Gentleman take into account the fact that this proposal, as originally put to the House of Commons, was bitterly opposed in different parts of the House and that it would have been all the more bitterly opposed on Second Reading and during the other stages if it had been suggested then that a very powerful foreign holding was to play a part in the final result? The hon. Gentleman referred to the meeting with the unions. In the light of the Government's humiliating defeat when this measure went through the House of Commons and the other place, will he give an absolute assurance that, if the work force is still opposed to this proposition, the Government will not go ahead with it, at least until the electorate has had a chance to pronounce upon it? The people of this country are not prepared to see Devonport dockyard handed over to profiteers and people who will not be able to serve the country as they have done for generations.

Mr. Hamilton

I cannot give the right hon. Gentleman that assurance. The House has made its position quite clear on this issue. I am afraid that I do not go down the road of sharing his paranoia of anything to do with the Americans. I believe that Brown and Root will have a great contribution to make to the management of these dockyards.

Mr. Robert Hicks (Cornwall, South-East)

Is my hon. Friend aware that the Plymouth sub-region already has very severe economic and social problems, sadly comparable to those in any part of the United Kingdom? In view of this increased job loss, what efforts will his Department make to alleviate the position, in terms of job training and the attraction of alternative industry to the area? Does my hon. Friend not agree that his Department—not just the Departments of Employment and of Trade and Industry—has a responsibility, in view of the decision that has been taken this week?

Mr. Hamilton

I sympathise with my hon. Friend on that point. But the difficulty is that the work load in the Devonport dockyard is falling. Therefore, I do not think that it is the job of the Ministry of Defence to subsidise jobs in Plymouth. The fact is that my right hon. Friends the Secretaries of State for Employment and for Trade and Industry are mainly concerned with Government support for the area. I believe, however, that the preferred contractor whom we have selected will provide the best possible opportunities for work to be brought into the dockyard.

Mr. Gordon Brown (Dunfermline, East)

Are we now to have Trident courtesy of the American Government, helicopters courtesy of Sikorsky, early warning aircraft courtesy of Boeing, and the refit of the majority of our naval frigates and submarines courtesy of Brown and Root of Delaware? Will the Minister tell us exactly how many jobs will be put at risk by subordinating the interests of national security to those of commercial gain? Will he not realise even at this late stage that the defences of this country should be under the control of this country?

Mr. Hamilton

I do not believe that the United States would feel that it is subordinating its national interests by accepting weapons systems from here. There is a two-way trade, and I welcome it.

Mr. Robert Atkins (South Ribble)

As one whose great great great grandfather was party to building the Plymouth-Devonport dockyard and as, therefore, I have an interest in it, may I ask my hon. Friend to confirm that the contract that his right hon. Friend has negotiated is a very tight one, giving the company the responsibility to find the money for redundancies and to ensure that there is not an excessive profit on non-competitive naval work? Will my hon. Friend also confirm that this contract, if it is completed, will provide, through the company. A much wider range of job opportunities, in that the company will have much wider world wide support, which will enable it to put contracts the dockyard's way?

Mr. Hamilton

That is absolutely true. The dockyards will be much more competitive if they become more efficient, because they will be able to get work from outside. I am convinced that Brown and Root has every opportunity to bring in such work. It is worth making the point that the combined savings of the two dockyards at Devonport and Rosyth will be about £320 million over 10 years.

Mr. Dick Douglas (Dunfermline, West)

Will the Minister take cognisance of the point made by his hon. Friend the Member for Ashford (Mr. Speed) about the personnel who may be in control of this consortium? What information can he give the House about the dominant role that Brown and Root will play in the selection of top personnel? Will he ensure that these top personnel are United Kingdom citizens so that vital information is not leaked across the Atlantic to a company that is highly engaged in defence contracts, especially in the Houston area? Will he not confirm that, despite all the protestations of unions and others, the Government have rolled on in their merry way with the idea of keeping to the vesting date of 1 April 1987 that they originally had in mind and that the whole process of consultation has been nothing but a farce?

Mr. Hamilton

The process of consultation has not been a farce. The unions have had six weeks in which to consult their members and that was on an extended timetable which the unions proposed. I understand that they have finished their consultations in Rosyth. It is unfortunate that they left their Devonport consultations until the last of these six weeks. Be that as it may, last week's weather may have made consultations more difficult. In the circumstances, we are prepared at today's meeting to consider Rosyth and the preferred contractor for it that we announced in December. We shall shortly issue a further paper on Devonport about the way negotiations have proceeded there and we shall invite the unions' views on that when they have considered that paper. I hope the House will agree that this is a sensible way to proceed.

Mr. Gerrard Neale (Cornwall, North)

I regret that I cannot report to the House the occupation of my great great grandfather. There is a common view in Devon and Cornwall about the need for a good future for Devonport, but there is no common view that what my hon. Friend is doing is wrong. Many people feel that it is perfectly sensible for him to look into proposals of this kind, which offer a better guarantee for the introduction of new work to the dockyard.

Mr. Hamilton

That is really the significant point, and I am grateful to my hon. Friend for making it. If the Devonport dockyard remains in the ownership of the taxpayer as a Government-owned plc, there will be significant job losses—5,000 of them in Devonport. The deal that we have made with Brown and Root says that the job losses will be somewhat less and the company offers the opportunity of bringing in more work.

Mr. Tam Dalyell (Linlithgow)

It would not be doing the Minister an injustice to suggest that he was a bit vague about the whole matter of foreign shareholdings. He said that it might be 29 per cent. and that that might not be acceptable, but that 31 per cent. might be all right. How do the Government know the exact foreign shareholding, given that there are nominee shareholders, which may make it difficult to know the percentage? Is not this all a bit of a farce?

Mr. Hamilton

It is not at all a farce. There is always difficulty about knowing precisely the number of shareholders in any company, but we will do our best to monitor that.

Mr. Patrick Nicholls (Teignbridge)

Does my hon. Friend agree that the immoderate way in which American involvement is attacked by the Opposition will cause a great deal of fear to the many tens of thousands of people in Britain who derive their living from working for American companies or for companies with American involvement? Does he also agree that the 45 per cent. of the shares held by Barclays de Zoete Wedd would be available for take-up by British companies, including the local dockyard management consortium, and that that shows that the overwhelming influence will be national and not international or American?

Mr. Hamilton

I can certainly confirm that. The Barclays de Zoete Wedd holding is 45 per cent. and, with the agreement of the Government, some or indeed all of that may be made available to British companies and, I hope, employees as well.

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

Will not the people of Plymouth be very angry tonight when they find out that not a single Member of Parliament from Plymouth is in the Chamber when D-day, D for Devonport, is being debated? When the Minister says that fewer jobs will be lost, will he give us a time-scale? The Minister said that the in-house offer was a loss of 5,000 jobs over seven years. Is it not possible that 4,000 jobs will go within two years under the proposals that the Government have accepted? Can we have a straight answer to that question?

Mr. Hamilton

The scale of job losses and what period they are spread over are confidential matters between the Government and the contractor. I am afraid that I am unable to answer for the people of Plymouth.

Mr. Tony Marlow

(Northampton, North): As I understand that NATO, which includes the United States, has kept the peace for the past 40 years or more, why is it that the knee-jerk reaction of the Opposition is one of rampant, paranoid, negative and spiteful hostility to the United States?

Mr. Hamilton

As my hon. Friend says, it is remarkable that we are keen to attract American investment into Britain, but when a good company comes in to take over the management of this dockyard, there is this extraordinary reaction, which will do nothing but damage to the prospects for jobs in this country.