British Rail Engineering Ltd

HC Deb 24 November 1987 vol 123 cc141-8 3.31 pm

The Secretary of State for Transport (Mr. Paul Channon)

As the House knows, British Rail Engineering Ltd. is one of the main suppliers of railway rolling stock to British Rail. It is also a wholly owned subsidiary of BR.

BREL has been extensively reorganised in the past few years. These changes have stemmed largely from the modernisation of BR's locomotive and rolling stock fleets, which has reduced substantially the need for repairs. BREL now consists of four main works—Crewe, York and two at Derby—and concentrates on manufacture and heavy overhaul.

The Railways board has now completed its review of options for the future of BREL. Sir Robert Reid has recommended to me that BREL should be offered for sale as soon as possible. I have now given my approval to this. I share the board's view that selling BREL will be in the best interests of the railway and of the BREL work force.

The board plans to invite offers for all four main works together as a single business. The aim is to be ready to invite offers by next spring, and to complete the sale as soon as possible after that. The Railways board and its merchant bank advisers will be in the lead in developing plans for the sale. My approval will be needed for the eventual sale.

The board proposes making separate arrangements for the sale of the BREL foundry at Horwich, The aim would be to find a buyer to take it over as a going concern, probably some time next year.

Great strides have been made by the BREL management and work force towards commercial viability and competitive levels of productivity, but I believe that the business can best develop and flourish in the private sector. There it will also have much greater freedom to diversify and compete for work outside the railway supply industry and, I hope, to create new employment opportunities.

Privatising BREL will be good for the railway, good for the railway supply industry, and good for the railway supply industry, and good for BREL itself. I hope, therefore, that the House will welcome it.

Mr. Robert Hughes (Aberdeen, North)

The Secretary of State's statement confirms the cynical manipulation and betrayal of the work force at BREL. Does he not remember that under his Government the work force will have fallen from 35,000 to 7,500 by April next year? Is it not also the case that BREL's sales will have fallen from £668 million in 1979 to £430 million, again by April next year?

Does the right hon. Gentleman recall that the Government claimed that they would not implement the Serpell report? Is he aware that this is the eighth time that BREL's work force has been deceived? Will he accept that the only people who have paid the price for this rationalisation have been the 25,000 people who lost their jobs in a vain attempt to secure the jobs of their workmates who remained?

Can the Secretary of State guarantee that privatisation will provide a secure future for the work force? What are the arrangements for pension rights —will they be affected by privatisation? Does he accept that the Government's and the management's response to the self-sacrifice of the work force has been contemptible? Is he aware that BR's management has ignored investment and, instead, has invested in redundancy cheques to the tune of £127 million? Does he accept that he is ultimately responsible for the framework that has encouraged the betrayal of the BREL work force? Does he not understand that, by putting his party's squalid obsession with competitive tendering before investment, he has chosen to put at risk the life of an industry?

Mr. Channon

I entirely disagree with the hon. Member for Aberdeen, North (Mr. Hughes) and especially with his last remarks. He said that we have not invested in BR, but I recall the enormous investment programme in BR worth some £3 billion of which approximately £1 billion will be in rolling stock and locomotives and for which BREL has an excellent opportunity to bid.

I am in no way cynically manipulating the work force of BREL. What I am trying to do—I genuinely believe this to be the case—is to offer BREL the possibility of a secure future. No one can guarantee for ever more the size of any particular industry. However, I am convinced that privatisation will offer BREL a much better chance in the future than it has had in the past.

As regards the fall in sales, I have a list before me of BR contracts currently placed with BREL and they total much more than £300 million. Since BR began to place new-build orders competitively, BREL has obtained about 70 per cent, of those orders. Thus, far from manipulating or deceiving the work force, my announcement today is an opportunity for that work force to have a better future than it had in the past.

Mr. Greg Knight (Derby, North)

Is my right hon. Friend aware that a matter of concern is BR's tendering policy and the fact that BREL is currently unable to tender for work where a penalty clause is included in the contract because, in effect, BR would be penalising itself? Will my right hon. Friend confirm that such a problem will disappear on privatisation? That will leave BREL well able to improve on its 70 per cent, success rate. Therefore, does he agree that anyone who is really concerned about the long-term future of BREL will warmly support his statement?

Mr. Channon

I am extremely grateful to my hon. Friend. I am aware of the case to which he has referred about the new diesel locomotives and the question of having a contractor who can take full responsibility for the design components and for any subsequent failures. Indeed, that matter was raised in the House in the recent transport debate. As my hon. Friend pointed out, any problem that may exist will be removed if privatisation goes through.

Mrs. Margaret Beckett (Derby, South)

Does the Secretary of State recall that about a week ago, in a debate in this House, my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody)—unfortunately, she cannot be here today—drew his attention to the pattern of previous privatisations, which is major investment followed by massive redundancies and the rundown of order books? My hon. Friend asked whether that was a prelude to the privatisation of BREL. Plainly it was. Can the right hon. Gentleman add to his statement by telling the House and the BREL work force how much he expects his friends in the City to make from this privatisation? What safeguards is he offering against foreign ownership since the safeguards offered in the case of Rolls-Royce —also in my constituency—patently failed?

Mr. Channon

Yes, I am aware of the speech of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)—I was present when she made it. I disagreed with a great deal of what she said.

I am trying, if it can be arranged, to get a secure future for BREL. No one can ever give a guarantee about that. However, I am convinced—as is BR and, I understand, the management of BREL—that BREL will have a much better future in the private sector. That is why I am pressing ahead with the proposals for the privatisation of BREL. I should have thought that the constituents of the hon. Member for Derby, South (Mrs. Beckett) would welcome my statement. I believe that she will find that she has done them a disservice by her attitude.

Mr. Kenneth Warren (Hastings and Rye)

I welcome my right hon. Friend's statement, but will he give an assurance that, before and after the sale of BREL, there will be no inhibition on that operation bidding for opportunities in either the Channel tunnel or the London Underground equipment programme? Will he also give an assurance that, when BREL is sold, there will be no inhibitions on the purchasers bidding for British Rail equipment?

Mr. Channon

I can give my hon. Friend assurances on both those points. I am very glad that he has drawn attention to the opportunities available in connection with the Channel tunnel and London Underground. They are in addition to the already very large sums that I quoted to the House a few moments ago about British Rail investment.

Mrs. Ray Michie (Argyll and Bute)

Does the Secretary of State accept that the real test of his proposals will be whether they produce a viable, competitive industry, with good job opportunities? Will he tell us whether he has any proposals for a management-staff buy-out, and can he reassure us that money from the sale will be reinvested in British Rail?

Mr. Channon

I agree with what the hon. Lady has said. The intention of the proposals in my statement is to create a viable and competitive industry, and it is because I am convinced that this is the best way forward that I have reached my decision, in consultation with British Rail.

As for the question of a management buy-out, I understand that the executive directors hope to proceed with a bid that will include employee participation. If that succeeded, it would no doubt be welcomed by the House. However, I cannot express views on its merits as opposed to those of other bids until I see what the other bids are. Certainly it is a possible opportunity.

Mr. Phillip Oppenheim (Amber Valley)

Does my right hon. Friend agree that the real betrayal of BREL occurred during the period when it was allowed to become a cosy, uncompetitive, tied supplier to British Rail? Does he further agree that competitive tendering must be in the best interests of British Rail and its passengers and that, in any competitive tender, BREL must have as good an opportunity as any other company to be allowed to supply equipment to British Rail?

Mr. Channon

I agree with everything that my hon. Friend has said. Competitive tendering must be good for British Rail, for the traveller and for the taxpayer and BREL must have the opportunity to compete fairly.

It is interesting to note that, since British Rail began placing new-build orders competitively, BREL has obtained about 70 per cent, of them. It has several overseas contracts at present, and hopes to secure substantial work in the future—on, for instance, Channel tunnel rolling stock. All those opportunities will be better in the private sector.

Mr. Tam Dalyell (Linlithgow)

My hon. Friend the Member for Derby, South (Mrs. Beckett) asked about foreign buyers. May we press the Secretary of State on that? Surely there is a feasible possibility—it is not an Aunt Sally—of a foreign buyer buying a workshop and getting hold of the whole new order book. After a certain period, it is not nightmarish to suggest that that order book might be transferred back to a factory abroad. What protection is there against a foreign takeover, over a period, of these valuable British assets?

Mr. Channon

I take note of what the hon. Gentleman has said. At present, I see no reason to exclude overseas bids; indeed, there are strong commercial arguments for allowing them. It is important that we should see what is the best price available for public assets, and that railway supply is an international market.

I want to ensure competition and a source of suppliers. The railway supply industry is strongly competitive, and I can see no reason for its not remaining so. All the issues can be taken into account in assessing offers, and, if there was ever any question of a monopoly being created, that would be a matter for the Director General of Fair Trading.

Mr. Tom Sackville (Bolton, West)

Does my right hon. Friend agree that the BREL foundry in my constituency in Horwich is one of the most efficient and best capitalised in Britain? There is a great and diverse market opportunity for its products. Does my right hon. Friend agree that that opportunity can be better realised in the private sector?

Mr. Channon

Yes; my hon. Friend is right. Horwich is a specialist foundry facility outside the mainstream business of rolling stock manufacture and heavy overhaul. BR and its advisers think that Horwich's future would be best served if it was marketed separately. I think that that is a good decision, and I hope that all will go well.

Mr. Michael J. Martin (Glasgow, Springburn)

Surely the words of Labour Members are coming home to roost. It was put to the Minister that the redundancies in and the closures of workshops, such as happened at Springburn, were all about getting a neat little package so that the Government could sell them off. Within weeks of the announcement of the proposed closure at Springburn, an American business man telephoned me and BREL directors promising hundreds of jobs in the Springburn area. BREL officials were convinced that he was only interested in the hundreds of acres of land that are now lying derelict in the inner city of Glasgow. What assurances will the Minister give that those who buy BREL will be more interested in providing jobs than in getting the land?

The Minister has not mentioned BREL Springburn, a maintenance company. What will be its future?

Mr. Channon

Springburn is not part of my announcement today because of the earlier decisions to which the hon. Gentleman referred. I understand his concern about that, but he knows what was announced about that some months ago. I am trying to create a viable industry with a secure future. I have had some experience of that in other industries in the past—[Interruption.]— and it has worked, despite the scoffing of Labour Members.

All the factors that the hon. Gentleman mentions clearly will be relevant when we decide what offer, if any, to accept for the sale of BREL. If the management buy-out is successful, I am sure that the hon. Gentleman's suggestions will be totally ill-founded, and I am sure that that will be true of any sale which the Government eventually approve. We are trying to create a viable industry with a secure and better future for the work force. Frankly, Labour Members do the work force no service by raising such issues when there is an opportunity to provide it with a much better future.

Mr. Michael Fallon (Darlington)

Is it not a characteristic of nationalised industries that they make thousands upon thousands of their workers redundant, as has happened at Shildon, including several hundreds of my constituents? Will my right hon. Friend confirm that, had this announcement been made 10 or 15 years ago and BREL had been allowed to diversify and compete on equal terms, it is at least possible that the Shildon wagon works would be operating today?

Mr. Channon

My hon. Friend may well be right, but the important point that the House should understand is that great strides have been made by the management and work force towards greater efficiency.

Mr. Bob Cryer (Bradford, South)

The right hon. Gentleman does not care.

Mr. Channon

I care for the future of the industry and for those working in it. The hon. Gentleman and others who make such points are the ones who are threatening the long-term future, not me. The changes that have taken place in BREL were the inevitable result of modernisation. BREL will have a much greater freedom to diversify and compete for work outside the railway supply industry, which I am convinced will be good for BREL and its work force.

Mr. Ken Eastham (Manchester, Blackley)

May I assure the Minister that the engineering workers who are deeply involved in these enterprises firmly believe that the Government have colluded with British Rail in sabotaging their future and their opportunities by prohibiting them from tendering for work? Since the workers have the biggest investment in the industry what consultation will take place with them, what assistance will be given to them and why is it that the Minister can suddenly say today that the Government will help them to tender for contracts when for months and years they have been precluded from so doing?

Mr. Channon

I do not understand how the hon. Gentleman can say that, when I have read out to the House a whole list of contracts that BREL has won in the past few years. As I have already said, BREL has obtained about 70 per cent, of new-build orders since the competitive tendering system started, so what the hon. Gentleman has said clearly is nonsense.

As for the allegation about some collusion with British Rail to destroy BREL—or words to that effect—I cannot imagine what conceivable motive British Rail or the Government would have for such a course of action. We are trying to create a secure future for the industry, with more jobs for the work force, more opportunities for diversification and more orders to be won in British Rail, the Channel tunnel, the Underground and in other areas outside the industry. I am amazed at the blinkered, out-of-date, doctrinaire attitude of Opposition Members.

Mr. Simon Coombs (Swindon)

Does my right hon. Friend recognise that today's announcement comes too late to save the Swindon railway works, which could have followed in the footsteps of Jaguar and other industries that have been let loose in the private sector and become infinitely more successful as a result? Is he further aware that former employees of British Rail Engineering Ltd. in Swindon have now found themselves jobs in the highly successful private-sector industries in Swindon and are now earning more money in better circumstances than they were before?

Does my right hon. Friend also recognise that the great days of the railway were in the times of the Great Western Railway, which was a private company? Has he ruled out the possibility of giving BREL workers a chance to buy a share in the equity in the new company that is to be created?

Mr. Channon

On my hon. Friend's last point, as I said earlier, one possibility is that of the executive directors proceeding with a bid that would include employee participation. I hope that that answers my hon. Friend's point.

Yes, I know the position in Swindon. As my hon. Friend knows, I was in Swindon with him last Friday, so I well know what is happening there. He has shown what can happen in certain parts of the country as a result of what has gone on in the past. In the four areas that are left—York, Crewe, Derby and Horwich—I am trying to secure better opportunities for people, and I think that I shall do so.

Mr. Cryer

As BREL has been in the forefront of railway technology, with the introduction and development of high-speed trains that are sold not only here but throughout the world, why is the Secretary of State giving the workers who developed and built those trains a kick in the teeth by placing all their jobs in jeopardy? As he is so mesmerised by private sector ownership, does he think that the new private-sector owners of BREL will be more or less competent than Townsend Thoresen?

Mr. Channon

I am not giving the workers a kick in the teeth; I am giving them an opportunity that they have not had in the past. Many of them will welcome that and realise that their best chance in the future is to be in the private sector and to enjoy the advantages of diversification and all the other things that I have announced which will help them. So far from the announcement placing their jobs in jeopardy, I have no reason to assume that it places anyone's job in jeopardy. I can give no guarantee—nor could any Minister—but I hope that my announcement will provide more security and opportunities for jobs.

Mr. Peter Rost (Erewash)

If, as I hope, my right hon. Friend receives a viable proposal for a management— employee buy-out, will he give us an assurance that he will give it especially favourable consideration even if it is not the highest cash offer that he receives?

Mr. Channon

I shall give it careful consideration and examine all the relevant factors—including what my hon. Friend has said.

Dr. John Marek (Wrexham)

If the Secretary of State is not giving the workers a kick in the teeth, and if, as he says, he thinks that the constituents of my hon. Friend the Member for Derby, South (Mrs. Beckett) would welcome his announcement, why does he not ask them and find out what they really think? I am sure he would discover that the overwhelming majority of opinion was that this was a large-scale betrayal, a confidence trick and a policy that has been agreed on by the Government for political purposes. The result is an announcement today that creates even more redundancies. In all likelihood, of the 35,000 workers that it once had, only 7,500 will remain in the industry.

Does the Secretary of State realise that he is announcing the death of a once great and powerful British industry? My simple question is, what guarantee can he give that there will be 7,500 jobs in the industry in a year's time?

Mr. Channon

Far from announcing the death of the industry, I am announcing new opportunities for it to expand. I am not announcing redundancies. I am offering the workers in Derby, Crewe and York a new future in a private industry and opportunities that they have not had in the past and that the Opposition would seek to deny them.

Mr. Patrick McLoughlin (Derbyshire, West)

Does my right hon. Friend agree that his announcement will lead to independence for British Rail Engineering Ltd., and will release it from management by British Rail? That will present new opportunities. Does he acknowledge that it would be more in line with Government policy and Government thinking for an offer from the workers and the management to be more seriously considered than a straightforward buy-out offer by any other company? Will my right hon. Friend give us that assurance?

Mr. Channon

I shall look carefully at any offer by the management and the workers. I understand the views of my hon. Friends the Members for Derbyshire, West (Mr. McLoughlin) and for Erewash (Mr. Rost). I also understand the general views of the House about management buy-outs. My record shows that on many occasions in the past I have given opportunities for management buy-outs. My hon. Friend the Member for Derbyshire, West is quite right about the future of the company. This announcement offers BREL and its management and work force independence and more opportunities. It does not offer them fewer opportunities, a dreary future with more redundancies or a future of decline. We are giving the company opportunities for the future and the Opposition, by their blinkered, doctrinaire, out-of-date views, are trying to deny it those opportunities.

Mr. Dave Nellist (Coventry, South-East)

Is the Secretary of State aware that when he said that this privatisation was in the best interests of the work force his nose grew by half an inch? It is certainly not in the best interests of the thousands who were sacrificed in Swindon, Glasgow, Derby and Crewe to enable the Minister to get to the position that he is in today. If he wants to pray in aid Jaguar and Rolls-Royce—and he will not do that for more than three or four months, given the way that the order books of those companies are going—why does he not remind the House of what happened, in his earlier incarnation, to Self-Changing Gears, the company that makes the gearboxes for British Rail trains? Immediately on privatisation it sacked 20 per cent, of its work force in Coventry. Five years ago Coventry Climax had 3,000 employees, but as a result of privatisation the company was reduced to nowt.

I ask the Minister for the final time: when it comes to privatisation, will he monitor the promises that he makes to the House to make sure that they are kept? Our experience in Coventry is that his promises are never kept.

Mr. Channon

On many enjoyable occasions in my previous job I debated privatisation with the hon. Gentleman. We agreed to disagree. He gives a few examples of failure in the motor industry and elsewhere, but I could give many more examples of successful companies, some of which employ more people, are more profitable and have much more secure futures. As I have said, we are offering BREL a better future. That is my genuine belief, and this announcement will be widely welcomed when it is fully understood.

Mr. Dennis Skinner (Bolsover)

Is the Minister aware that, based upon the statements already made in Parliament, it is apparent that the Government have a hatred for workers, especially those that are organised in trade unions? In view of the fiasco of the BP sale, will he give a guarantee that the Chancellor or some other Minister will not underwrite the underwriters? If he cannot get bidders in Britain, will he give a guarantee that the Kuwaitis will not be in with the first 10 per cent.?

Mr. Channon

The hon. Gentleman may not have heard my statement. I said that we would have a trade sale and not a flotation.

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

Was the tender price submitted by BREL for the 158 Sprinter in any way influenced by the knowledge that that company may have had that it was to be privatised?

Mr. Channon

No.

Mr. Robert Hughes

Will the Secretary of State confirm that BREL has successfully competed for work outside the railway industry? If the reorganisation of BREL and its recent success in tendering have been so good, why is the Secretary of State privatising it, other than for reasons of pure dogma and trying to make sure that once it is profitable his friends can get their snouts in the gravy trough?

Mr. Channon

As I have tried to explain to the House, it will give BREL the opportunity to diversify into other industries apart from the railway supply industry, it will give it financial opportunities, it will remove it from the shackles of Government financial control—inevitable in nationalised industries—and will provide it with a whole range of opportunities that are not available at present. That is why we will privatise BREL. It will be widely welcomed by BREL management and, I hope, the workers because it will give them the best opportunities.