HC Deb 19 December 1989 vol 164 cc197-202 3.31 pm
Mr. Martin O'Neill (Clackmannan)

(by private notice): To ask the Secretary of State for Defence if he will answer the question on type 23 frigate orders of which he has been given notice.

The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Michael Neubert)

Competitive bids were sought from British shipyards for a batch of between one and four type 23s. Three yards—Cammell Laird Shipbuilders in Birkenhead, Swan Hunter Shipbuilders in Newcastle upon Tyne and Yarrow Shipbuilders in Glasgow—responded, and it has been an extremely keen and commercial competition, to the taxpayer's benefit. All three yards are to be thanked for taking part in it.

The competition demonstrated that our commercial approach is continuing to encourage improved efficiency in the industry, enabling it to compete more effectively here and abroad. It also underlined the benefit of ordering in batches and the better value for money that results from it. On this occasion, having invited tenders for up to four ships, we have decided to order three. To order four now, even all from one yard, would not give us significantly more attractive unit prices than ordering three. The new ships will be named Westminster, Northumberland and Richmond.

After evaluation of the bids, we have decided, subject to contract, to place the order with Swan Hunter Shipbuilders of Wallsend in Newcastle upon Tyne.

Swan Hunter's has won our order fairly and squarely on commercial terms. The value of the order is commercially confidential, but I can say that the average unit cost of the three new ships is significantly less in real terms than for the last order, which in its turn was lower than for previous ships of the class.

It follows that both Swan's and the other yards were extremely competitive this time. We are sure that they will be keen bidders for our future requirements. They will, for instance, be able to bid for another batch of type 23s, for which we hope to invite tenders next year.

Nine type 23s are now on order for the Royal Navy. It remains the Government's policy to maintain a surface escort fleet of about 50 destroyers and frigates. This latest order demonstrates as clearly as possible our commitment to NATO and to our nation's defence. At the same time, today's announcement confirms that we remain resolute in pursuit of value for money.

Mr. O'Neill

I thank the Under-Secretary of State for his announcement, which confirms the one that was made this morning in Press Association tapes. Although his statement will bring a sigh of relief to workers and their families on the Tyne, it will be a source of bitter disappointment to fellow workers elsewhere. Can the Minister give some hope to the rest of those employed in British warship building, by confirming the number of type 23s for which he will be seeking tenders in the forthcoming year?

Will he also confirm that he accepts the view of the Select Committee on Defence that orders of around 2.6 frigates per annum are necessary to maintain a surface fleet of about 50 vessels? Will the Under-Secretary of State confirm that price was the only factor involved in the competitive tendering process? Does he acknowledge that although that process can drive down prices, it can also drive the losing yards out of business and thus prejudice future competition?

Finally, what prospects can the Minister offer in the way of alternative and additional work on the Clyde and Mersey—for example, in maintaining our defence forces' amphibious capability? The Government have talked about that for many years, but they have yet to come up with any tenders.

Mr. Neubert

The hon. Gentleman gives a welcome, albeit grudging, to my announcement. Of course, the yards that have been unsuccessful must be disappointed—but not, I trust, despondent. On the previous occasion when an order for type 23s was announced—last July, by my hon. Friend the Member for Hove (Mr. Sainsbury), then Parliamentary Under-Secretary of State for Defence Procurement—the hon. Member for Rhondda (Mr. Rogers) forecast the possible closure of Swan Hunter, but that did not happen. Instead, I am able to announce today that an order has gone to that yard. I am unable to say how many frigates are likely to be ordered next year, although we shall again seek to invite tenders for a batch of frigates. At the time of last year's announcement by my hon. Friend the Member for Hove, my hon. Friend the Member for Hampshire, East (Mr. Mates), Chairman of the Select Committee on Defence, called on the Government to maintain the momentum by ordering two more frigates this year. We have done rather better than that. We have ordered three.

Mr. Barry Porter (Wirral, South)

Is my hon. Friend aware that his announcement will come as a bitter disappointment to the workers of Cammell Laird? I hope that he will take into account the possibility that, by next year, Cammell Laird may no longer exist to tender for orders.

Mr. Neubert

We take wider considerations into account, and my announcement is good news for the Navy, for NATO and for the yard that won the order this time—in the same way that it was good news for Yarrow's when it won last year's order. Cammell's has a substantial amount of Ministry of Defence business and it will be able to bid for the new type 23 order that we hope to place next year. We are also evaluating Cammell's tender for an aviation support ship, which it has submitted together with its parent company. We must hope that with improving productivity and increasing competition—the competition for the previous order was extremely keen—other yards will be successful in the future.

Dr. Norman A. Godman (Greenock and Port Glasgow)

The Minister will know that his announcement will cause deep disappointment among the employees of Yarrow's —a goodly number of which are constituents of mine who found work at that yard following the closure of Scott Lithgow. However, I am sure that Yarrow's employees will not be too deeply dismayed because they know that they work in a first-class yard. Can the Minister say how commercially and financially realistic the successful bid was?

Mr. Neubert

The hon. Gentleman's final question concerns a matter of commercial confidentiality. I commend the HMS Norfolk—the first of class that came from the Yarrow yard—of which we have received excellent reports. As the hon. Gentleman knows, Yarrow was also very successful in winning the previous two competitions.

All that has been said is possible only against the background of a sound economy under a Conservative Government. The strength of our economy and the soundness of our defence policy is the greatest reassurance that one can give for the future of shipbuilding in this country. If the Labour party conference proposal of a £5 billion cut in Britain's defence was ever put into effect, the prospects for British shipbuilding would be bleak if not non-existent.

Mr. Neville Trotter (Tynemouth)

Does my hon. Friend accept that this is splendid news, not only for Tyneside, but for the Royal Navy, reflecting Swan Hunter's proven record for the delivery of frigates on time and without defects? Does he accept that it is a splendid boost for Tyneside as we enter the 1990s, with thousands of jobs ensured for years ahead? Does he further accept that Swan's has matched its proven record of quality and commercial success in winning the order against fierce competition?

Mr. Neubert

My hon. Friend the Member for Tynemouth (Mr. Trotter) has been exceptionally active inside and outside the House in the promotion of the interests of Swan Hunter's work force. He deservedly shares in its success today. Over recent years, the yard has established an enviable reputation. HMS Chatham was delivered without a single recorded shipbuilders' liability defect. It is a tribute to the efforts made in it and other yards that we had such a successful competition, which led to this outstanding result.

Mr. Jim Sillars (Glasgow, Govan)

Will the Minister confirm the remarks that he made a few moments ago to the hon. Member for Wirral, South (Mr. Porter), that wider considerations were taken into account in making the decision? Is that not a contradiction of his previous statement that he made a purely commercial decision? Does that not lead us to the conclusion that basically it was a political decision? Is it not the case that once again the Scottish Office has lost inside the Government machine?

Mr. Neubert

Given that Yarrow won the previous two competitions for type 23 frigates, it comes ill from the hon. Gentleman to complain because it was not successful in this competition, which was extremely keen. Price was a major consideration, which is the purpose of inviting tenders in batches and orders from competitive yards. However, that was not the only consideration. As a responsible Government, we must take all considerations into account. This represents the best value for money and the best for the Royal Navy and the defence of Britain.

Mr. Jonathan Sayeed (Bristol, East)

My hon. Friend will know that the value of batch ordering has been urged on his Department for a number of years. I am glad to note that it continues to respond to that advice. Will the next batch be of equal size—three? Will he give the in-service dates of the three frigates, and will he say whether they will be equipped with the type 23 command system?

Mr. Neubert

My hon Friend has a respected record of interest in these matters. At this stage, we cannot say how many there will be in the batch for which we hope to invite tenders next year, nor is it our practice to announce in advance acceptance dates for such warships. I reassure my hon. Friend that the new frigates will have the new command system from their build.

Mr. Frank Field (Birkenhead)

Does the Minister need to be reminded how serious the implications of his statement are for the future of Cammell Laird? While he is thinking about that, may I ask him two questions? First, can he say when he will put out to tender the new work for frigates next year? Secondly, has he had time to reflect on the bidding skills of the board of Vickers Shipbuilding and Engineering Ltd.? Would it be fair to say that its skills do not yet match those of the men and women who build boats at Cammell Laird?

Mr. Neubert

I readily understand the disappointment that will be felt by the management and men of Cammell Laird, their families and all those whose livelihoods depend on the successful securing of new ship orders. A competition is a competition, and it was fairly and squarely won by a yard that is in an area of above average unemployment. I cannot give the number of frigates that might be ordered next year or the timing of the placing of the order, but Cammell Laird has that prospect for the future. The hon. Gentleman would not expect me to comment on the policy of the VSEL board.

Mr. Tim Devlin (Stockton, South)

Is my hon. Friend aware that there will be a wide welcome in the north for this magnificent news for the north-east, which has implications across the region for construction and other spin-offs? I predict that there will be cheering on Tyneside tonight. Will my hon. Friend confirm that no one area has a God-given right to build ships? The only right that anyone has to build ships for the Royal Navy is, after proper competition and on full economic grounds, through producing the best possible defect-free product for the Royal Navy.

Mr. Neubert

Yes. The order and the competition that precedes it demonstrate, first, the British commitment to our defence, which is important, secondly, the benefits of ordering by batches and, thirdly, the competition that that creates. There are other advantages. Tonight there will be rejoicing on Tyneside because, we calculate, this order is equivalent to 10,000 jobs being sustained for four or five years. It is a valuable boost to employment in an area with above-average unemployment.

Mr. Ted Garrett (Wallsend)

Does the Minister recognise that I for one give not a grudging welcome to his announcement, but a delighted one? I speak for the people of Wallsend. The shipyard is in my constituency and is where most of my employed constituents work. Does he agree that the tributes made this afternoon are to the credit of the work force, the management and the excellent trade union relationships? Finally, may I say that it gives me great personal pleasure that one of the ships is to be named after the noble county of Northumberland?

Mr. Neubert

The hon. Gentleman has spoken in character and I join him in paying tribute to the work force at Swan Hunter that has secured this order. I can also pay tribute to the other yards that I visited and that are showing signs of improved productivity and extremely keen bidding. It was a most competitive competition and there had to be losers as well as a winner, but all the yards can be commended for their efforts to secure the order.

Mr. James Couchman (Gillingham)

My hon. Friend will know that we look forward to welcoming HMS Chatham on the Medway in the near future after its successful commissioning. This is splendid news for Swan Hunter, the private management of which has grown in our respect in the past four years since privatisation. Does this order have ramifications for building a third auxiliary oiler replenishment vessel? Can my hon. Friend say anything about that yet?

Mr. Neubert

I welcome my hon. Friend's comments on HMS Chatham, which come so close to home. I cannot say anything about auxiliary oiler replenishment vessels now, but the order has no implications of the kind that my hon. Friend suggested.

Mr. Menzies Campbell (Fife, North-East)

I welcome the Minister's announcement but, like many hon. Members, I understand the disappointment that will be felt elsewhere among the unsuccessful yards. Does the Minister agree that that disappointment might be mitigated if the Government were now to adopt a consistent pattern for ordering ships, as the Select Committee on Defence urged them to do? Does he agree with the Select Committee's point that a single year's orders is not the same thing as a consistent ordering pattern over a number of years, and the two should not be confused."?

Mr. Neubert

That is the view of the Select Committee on Defence which the hon. and learned Gentleman has quoted. It is for us to decide at each stage what the needs of the Royal Navy are and what orders we should place to support a fleet of escort ships. As the hon. and learned Gentleman knows, the Government's policy is to have a fleet of about 50. I am pleased to say that as a result of the order announced today and with the number of existing ships, the total in the fleet is 49.

Several Hon. Members


Mr. Speaker

Order. The House knows that we have a busy day ahead of us, with two statements and an important debate. I shall call one hon. Member from each side. Then, I regret, we must move on.

Mr. Julian Brazier (Canterbury)

My hon. Friend's announcement is the third in a row in which three ships have been ordered. For the benefit of the Opposition Front Bench, will he spell it out once more that these orders are placed not just on front-end costs, but on other valuable issues, such as quality, ability to deliver on time and maintaining a competitive base?

Mr. Neubert

I know that this is the Christmas season, but I hope that my hon. Friend will not see three ships coming in automatically. This time we have been able to order three ships. He is right that quality, delivery on time and general productive performance are important factors in securing a successful order.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

Will the Minister confirm that quality also played a part in his choice of yard for the order? His announcement will be greeted with a great sigh of relief on Tyneside, in the constituencies represented by my hon. Friends the Members for Wallsend (Mr. Garrett) and for Jarrow (Mr. Dixon), and by me. All that our shipbuilding community has ever sought from the Ministry of Defence has been fair play. We have tried hard to accommodate ourselves to the current procurement regime and to survive. Will the Minister confirm that today's announcement reflects that our community has done just that? I am sorry that it was not possible to share the order with Yarrow, but I was even sorrier last time when Yarrow won all the frigates and it was not possible to share one with us.

Mr. Neubert

The hon. Gentleman's comments are genuine and heartfelt. I have no hesitation in repeating my tribute to the quality of work at Swan Hunter, which undoubtedly led to the improved performance that has enabled it to make such a successful bid. It is a lesson for all yards that they must continue to work for better performance, to sharpen their competitive edge for orders here and overseas.

Mrs. Maria Fyfe (Glasgow, Maryhill)

On a point of order, Mr. Speaker.

Mr. Speaker

No. I shall take points of order later, after statements.

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