HC Deb 24 January 1991 vol 184 cc552-60

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Davis.]

10 pm

Mr. Tim Devlin (Stockton, South)

This is an extremely difficult time for the Ministry of Defence and I do not want to add unduly to its burdens at the moment, but I believe that the present crisis in the Gulf and the distractions of Ministers and senior civil servants may be being used as an opportunity to thwart Government policy on the dispersal of civil servants to the regions. This issue is bigger than simply that of whether this unit should be moved; it concerns the trust that the people put in the Government's word, and it is an issue of management because tonight I want to ask the Minister whether he will allow this trickery to frustrate his predecessor's policy. We have a right to know who is in charge of the Ministry of Defence, Sir Humphrey or the Secretary of State.

Let me briefly set out the facts of the matter as I see them and so that everyone else can see what is going on. The Government's policy on relocation is set out in the written reply by the Paymaster General, then my right hon. Friend the Member for the City of London and Westminster, South (Mr. Brooke), to a question from my hon. Friend the Member for Beverley (Mr. Cran) on 9 February 1989 at column 751.

In pursuit of this policy, first announced in 1979, with my hon. Friends the hon. Members for Darlington (Mr. Fallon), for Langbaurgh (Mr. Holt)—whom I see here this evening—for Hexham (Mr. Amos), and for Tynemouth (Mr. Trotter}-who has sent his apologies—I went to see the Secretary of State for Defence in late 1988 to secure the movement of the Department's quality assurance unit from cramped and inadequate premises on three sites in Woolwich and Bromley in south London. A bid was prepared by the newly formed Teesside development corporation on the basis of one of its five flagship development sites in Teesside, the Preston Farm industrial estate. As usual, the development corporation carried out an excellent job in presenting the manifold advantages of such a move from Woolwich and Bromley to the north of England.

The project was costed at .72 million, and the TDC obtained two tenders from established and reputable civil contractors in that amount. In anticipation of the sale of the Bromley and Woolwich premises, which in part could already achieve about .50 million, it was expected that the relocation could be largely self-financing. An unusual finance package had then to be put together for the Ministry of Defence to bridge the development of the new site and the disposal of the old sites.

When the Treasury would not give immediate consent, my colleagues and I approached the then Prime Minister, my right hon. Friend the Member for Finchley (Mrs. Thatcher), to ask for her support. This was readily forthcoming, and on 4 July 1989 final approval of the project, now costed at .120 million, was given by the then Minister for Defence Procurement, the hon. Member for Hove (Mr. Sainsbury).

In September 1989, the present Secretary of State took over, and I invited my right hon. Friend to visit the constituency and to turn the first sod on the development. It was anticipated then that, once the redeployment was completed, savings in revenue costs of the order of £9 million a year would accrue to the Department. The development corporation immediately began development of the site and negotiations were started to move three explosive testing units to the same site, so that all Ministry of Defence quality assurance could be centralised in one place.

Those further moves were announced on 25 January 1990, once again in a written answer to me. Work continued apace until 10 August last year when, only seven months after its announcement, the enlarged project was stopped by a letter from Mr. Miller, the director general of quality assurance. In that letter Mr. Miller said that his department had received the first estimate from the consulting engineers, Atkins, of the cost of the detailed design of the buildings and that these were very considerably higher than PSA's figures adjusted for addition of the outstations and inflation … This has forced us into a cost-cutting exercise … and a reexamination of whether it makes sense … to replicate on Teesside all our existing facilities. Later in the letter he said that major contracts associated with the move should be deferred until a re-examination of the costs had been completed.

In my view, and that of all my hon. Friends, the Department would be quite right to hold up this project if, as I am told, the costs have soared from .120 million to between .250 million and .280 million. However, it has become apparent that the Atkins costing is fundamentally flawed, and the Ministry of Defence knows it. The structure and layout of this facility in the plans would make it the most expensive construction ever built on Teesside. Per square foot, it would be nine times as expensive as premium office space under construction on the neighbouring plot.

Atkins is a firm of consulting engineers, not property specialists, and that might, in part, explain what is going on. However, let the House not imagine that this is some complicated venture. We are talking about offices, laboratories and warehouse space of a type commonly constructed on Teesside. The rocketing cost appears also to stem from a specification which can only be described as grandiose. The laboratories are larger than those used in the nuclear industry. That is why the chief executive of the Teesside development corporation has been attempting to get a copy of the specification and the costing from Mr. Miller, safe in the knowledge that Teesside can produce a much more reasonable quotation on a sensible specification.

I put that point to the Secretary of State and the Minister when I saw them formally with my hon. Friend the Member for Tynemouth (Mr. Trotter) last year, but I am sorry to say that we have not yet received those documents. As a result, the cost of this project has mysteriously dropped by .100 million. So officials have now fallen back upon a second tack—"We can't make a decision because of 'Options for Change', the defence White Paper." They even convinced the Secretary of State that the future of the quality assurance unit might be up for grabs, or in question.

On 4 December 1990, I said in the House that the only acceptable way that this redeployment could be cancelled would be if the whole unit were to be closed down by defence cuts. The chief executive and I have been reassured more than 20 times that the fundamental integrity of this project was not in jeopardy. That is why I have urged concerned local councillors not to panic. However, in spite of my many efforts to get those reassurances in writing, they have not been forthcoming.

I did not have any reason to doubt the bona fides of the Ministry of Defence officials until recently, when the full extent of their double dealing came to light. I now understand why the reply to my request for the specifications from the Secretary of State was as follows: The issues being considered are wider in scope than the affordability of the DGDQA as planned. This was because, early in the new year, suspicions were aroused that the director general was examining a move to Portland, in Dorset. That was confirmed when my colleague who represents that part of the world—the hon. Member for Dorset, South (Mr. Bruce)—started asking me questions about Stockton's interest in the matter while we were on a delegation visiting Israel.

Therefore, it is not the case that the quality assurance unit is about to be closed down completely. The price tag that the Government have put on the project is .140 million. Portland, which would be a patch-and-build operation, works out at .135 million—surprise, surprise. Teesside works out at .180 million on the specification which they will not disclose. This is absolutely disgraceful. Unless the Minister gets to grips with his Department, he will be forced to resile on a firm commitment made to the people of Teesside to move 1,500 jobs to the area. The Secretary of State will be forced to welsh on the promise given by his predecessor and endorsed by the former Prime Minister, and the faith which the people have put in the Conservative Government to deliver their promises will be undermined.

I see from articles in the press that there is speculation that the Government are to dispense with Portland as a naval base. That appears to be confirmed by what is going on in this case. While my heartfelt sympathies go out to the loyal citizens of that town for their long service to the Navy, it is in no way fair to break faith with the people of Teesside in order to soften the blow in Portland. The Ministry of Defence should therefore find the solution to that problem in the many other unannounced redeployments which it is considering.

Mr. Richard Holt (Langbaurgh)

The people of Teesside deserve better from the Government than they have had over this issue. As my hon. Friend knows, this is not the first time that major Government Departments have decided to move to that part of the world and have failed to do so. Every time we ask questions, we are given the trite answer that four fifths of all civil servants live outside London. If one takes all the people who work in the Department of Health and Social Security offices, job centres and everywhere else, that is bound to be the case. But no senior civil servants live outside London. It is because none of them will move to the north of England that we who represent Teesside suspect that what my hon. Friend is saying this evening is absolutely correct.

Mr. Devlin

There was one project 10 years ago when the previous Labour Government promised to move the Property Services Agency to Middlesbrough. The incoming Conservative Government cancelled it, because they wanted to privatise the PSA. That has not been forgotten. But it is different in this case, because the same Government who promised it are now seeking to withdraw it. In the previous case, one Government promised it and another Government then cancelled that commitment.

Perhaps we should wait to see the outcome of the present war before we reshape the nation's defence capability. The Under-Secretary of State for Defence Procurement who I know to be a good friend to the north, should not on any account give in to a bunch of southern backsliders. Before my hon. Friend the Minister goes any further down this disagreeable route, I point to six reasons why he should now reaffirm the commitment which the Government made to the people of Teesside, and ask him to confirm two things.

First, such a development would have a major effect on the local economy, and particularly the training of good scientific skills. Indeed, youngsters from Teesside are already training in London for their new jobs once the move takes place. Secondly, the unemployment rate in Stockton is 10.7 per cent., down in the past two years from 18 per cent., whereas in Portland it is only 6 per cent., and until recently has been 4 per cent. Thirdly, this unit would benefit greatly from good access and infrastructure links. These are available on Teesside and are being further developed to take this development, whereas they are not available at alternative sites.

Fourthly, on Ministry of Defence costing criteria, whether one looks at a 20 or 50-year payback period, a patch-and-build scheme will need further expenditure sooner than a complete new build. Fifthly, the project as announced fitted in with the Government's policy of dispersal and played a role in the inner cities initiative, going as it was to an assisted area, in particular, it was a key site for the Teesside urban development corporation.

Lastly, and in my view most importantly, we should regard our word as our bond. Eleven years ago, the incoming Conservative Government cancelled the move of the PSA to Teesside so that they could privatise it. The same Government have now made the announcement that this dispersal is to take place and are now seeking to resile from it.

I ask the Minister three questions. First, will he confirm that the benefits that first attracted the Ministry of Defence to the scheme still stand? Secondly, will he give me an assurance that the original site has not been discounted? Thirdly, will he agree that the specification and costing should be given to the Teesside urban development corporation so that it can be re-examined and further representations made to him about the project? I say in conclusion that it will be to the eternal shame of this Government if this redeployment is allowed to fail.

10.14 pm
The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Kenneth Carlisle)

I congratulate my hon. Friend the Member for Stockton, South (Mr. Devlin) on securing this Adjournment debate. He has represented his constituency's interests both in the House and outside it—not least when he and my hon. Friend the Member for Tynemouth (Mr. Trotter) met my right hon. Friend the Secretary of State for Defence and myself last December. My hon. Friend has pursued the matter with the utmost tenacity and determination, and I respect his anxiety to secure jobs for his constituents and others in the north-east. I am glad to see that my hon. Friend the Member for Langbaurgh (Mr. Holt) is also present: I know that he too is very concerned about the problem, and has supported the project.

I must, however, reject the assertion by my hon. Friend the Member for Stockton, South that the civil service has been involved in double dealing. The civil service is trying to make the best possible decision for the public, in the most thorough possible way. I am the Minister responsible; I am here to make the decision. If anyone is to be blamed, it is me. I assure my hon. Friend that I have the interests of his constituency at heart, but it is essential to the pursuit of good government to make the right decisions and the best possible use of public funds.

Let me briefly give the background to the proposal to relocate the directorate general defence quality assurance to Teeside, and explain what has led to the current review of that proposal and how matters now stand. As the House may recall, in the mid-1980s many organisational changes took place in the Ministry of Defence, with the twin aims of improving efficiency and reducing administrative overheads.

One of those changes was the establishment, in 1984, of the post of director general defence quality assurance. The DGDQA assumed responsibility for quality assurance matters across the Ministry of Defence, absorbing a number of separate departments. One of the DGDQA's responsibilities is to run laboratories and test facilities to provide technical support to the procurement executive and the armed services. The technical support directorate has approximately 1,100 staff of whom some 700 are scientific and technical officers. It handles some 40,000 tasks a year, including product verification, defect investigation, calibration, technical advice to project managers, advice on health and safety, environmental chemistry and some research and development. When my hon. Friend criticises the expense involved in any new building for the establishment, he should recognise the wide variety of work that the people there are called on to do.

Mr. Holt

Does that catalogue of jobs contain any element that was not known about before the Government's first commitment, or has some new requirement suddenly emerged? The employees have been doing this work for more than 50 years.

Mr. Carlisle

I shall explain later why the cost has risen; I think that that is what my hon. Friend is asking.

Even in 1984, it was clear that it was not enough merely to change the management structure. The new DGDQA inherited more than a dozen geographically separated sites: it was very widely dispersed. If overheads were to be cut and staff numbers substantially reduced, a programme of consolidation on to fewer sites was clearly needed. Some changes could be accomplished quickly—for example, sites at Plumstead in south-east London and Harefield in Middlesex were closed, and their facilities were moved to existing accommodation at Woolwich. However, we were still left with DGDQA operating from three large sites —Royal Arsenal west, Royal Arsenal east at Woolwich, and the Aquila site at Bromley, all in south-east London, and a number of smaller sites around the country.

A study suggested three main options—to continue on the three main sites, to collocate on to the main site of Royal Arsenal west, or to collocate on Teesside, which was considered then the best location for a totally new build option. On the basis of initial estimates of construction costs and tested by investment appraisal, the Teesside option emerged then as the most cost-effective solution. In March 1989, my predecessor, my hon. Friend the Member for Hove (Mr. Sainsbury), announced our proposal to move 1,500 DGDQA posts to Preston Farm on Teesside between 1993 and 1995. It was subsequently agreed to add to the package the remaining outstation establishments employing a further 100 staff. Thus, the final package comprised the 1,100 technical support staff and some 500 headquarters and support personnel.

Early in 1990, external project managers were engaged, part payment was made on the main part of the Preston Farm site, and detailed planning was set in hand. At this point I would like to express my appreciation for the co-operation and expert assistance of local authorities on Teesside, and in particular the Teesside development corporation, within whose area the site is located.

As work progressed, it became clear that to replicate on Teesside all existing DGDQA facilities, including the outstations, would cost substantially more than the sum budgeted on the basis of earlier broad-brush and non-site-specific costings—

Mr. Holt

rose—

Mr. Carlisle

No, I will not give way yet. My hon. Friend must let me develop my argument. I will give way later.

This was the case even though the plans and costings were based on a reduction in the area of buildings of some 20 per cent. compared with existing accommodation. When the details were worked out, it became quite clear that, because of the specific needs of the DGDQA, the costs were substantially more than we had initially anticipated.

Mr. Holt

rose—

Mr. Carlisle

I am rather anxious to reply to the points raised by my hon. Friend the Member for Stockton, South. It is his debate.

Rather than plough on regardless, which would have been quite wrong, a decision was taken in August 1990 not to cancel or deter the project, but to put it on hold for a short period while we considered how estimated costs might be reduced. That was perfectly reasonable in view of the fact that public money was being spent.

Mr. Holt

rose—

Mr. Carlisle

No, I will not give way. My hon. Friend the Member for Stockton, South has raised these matters; it is his debate.

Design studies had been taken to a point where the cost of constructing individual technical facilities had been identified and it was therefore possible to target these facilities and establish whether costs could be reduced by lowering technical specifications, reducing the size of the building or considering whether a particular task might be undertaken more cheaply or efficiently elsewhere in the Ministry of Defence or by industry.

Mr. Holt

rose—

Mr. Carlisle

I wonder whether my hon. Friend has the permission of my hon. Friend the Member for Stockton, South to make his point.

Mr. Holt

Yes, I do have his permission. The Minister keeps talking about replicating on Teesside. This is relocating on Teesside, not replicating. If one relocates, one does not need the facilities that are down in the south; one relocates to the north, and one does not have the expenditure that replication involves.

Mr. Carlisle

When I talk about "replication", I mean that one has to transfer some of the existing activities in the south up to the north, so one needs to build fairly costly facilities to undertake those operations. We looked, therefore, to see whether we could recast our designs and costs to make the transfer cheaper.

However, this is a more complex matter than might be appreciated, as the technical support directorate conducts tests across a range of disciplines, such as materials science, mechanical engineering, electronics and software engineering, on products ranging from main battle tanks and guns, through fuels and lubricants to explosives and micro-electronics. As my hon. Friends will understand, it is a complicated business. These studies have gone well and, although the gap between the August 1990 costings and the sum budgeted has been reduced substantially by our work, it has not been eliminated.

I have, therefore, asked the Department to identify the further facilities that would have to be cut to get down to budget and what the implications of cutting or reducing capabilities would be, both operationally and financially. When looking at the wider picture, we have to consider, for example, whether cutting capabilities would merely transfer costs to other parts of the Department.

Before ministerial colleagues are invited to take a final decision on the project, I have also asked officials to consider—as circumstances have changed considerably since initial feasibility studies were conducted four years ago—whether costs might be reduced by moving to a site where construction costs could be lower than those anticipated at Preston Farm. This essentially implies a site where surplus good quality technical facilities already exist. Local authorities and central government regional offices have identified several sites on Teesside and elsewhere in the north-east of England which, without prejudice, are worth further consideration and will be inspected within the next week to see whether significant savings, compared with Preston Farm, could be achieved.

As the House will be aware, the process of rationalisation and slimming down, which led to the creation of DGDQA, has continued across the Ministry of Defence and will continue for several years, not least following the "Options for Change" studies, and the decision, following "next steps", to create agencies where that promises to be the most effective way forward. We are in the middle of a substantial programme of change in the Ministry of Defence, and we cannot ignore that in making the decision on DGDQA.

I have therefore asked my Department to consider whether any existing Ministry of Defence sites that might be scheduled for closure could accommodate DGDQA with the prospect of significant savings compared to Preston Farm. Only one such site has been identified, and that is in the south-west of England. It is the Admiralty research establishment, Southwell, at Portland in Dorset which, as the staff, my hon. Friend the Member for Dorset, South (Mr. Bruce) and other interested parties have been told earlier today, is to be the subject of a study as part of a review of ARE facilities.

DGDQA has been asked to examine, if ARE Southwell were to close, what the savings, if any, might be compared to those of Preston Farm. I must, of course, stress that the closure of the ARE site and its occupancy by DGDQ A are no more than possibilities at this stage, and no decisions have been taken. No decision has been taken on the naval base at Portland either.

I am aware that there are hon. Members who question the need for DGDQA to move away from London. I have to say that, although we will re-run our investment appraisals once the above studies are completed, the work conducted to date by our project managers suggests that the cost of necessary reconstruction on London sites were DGDQA to remain on them is likely to be far higher than for sites outside London and that moving out of London will yield lower staff costs and other running costs in the long term.

To sum up, our cost reduction exercises are almost complete. We will look sympathetically at Preston Farm. If all things were equal, we should like to move to the north, but, in reality, we have to consider all the interests carefully in the purpose of good government. We have to consider the interests of the taxpayer as well as the efficiency of the operation and the availability of spare buildings. It is my responsibility to see that all the options are taken and considered.

Although I thank my hon. Friend the Member for Stockton, South, and although I have considered seriously the wish that DGDQA should go to his constituency, the right way to proceed is to examine all the options if the public is to get proper value for money. I am grateful to my hon. Friend for initiating this debate, and for his understanding and tolerance in the task that we face.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.