HC Deb 23 January 1992 vol 202 cc502-9

4.2 pm

The Secretary of State for Defence (Mr. Tom King)

With permission, Mr. Speaker, I wish to make a statement on a further order for type 23 frigates.

The type 23 frigate will form the backbone of the Royal Navy anti-submarine surface force in the future and is, in addition, a highly capable all-round warship. Four are already in service and six more are under construction. In June we invited tenders for up to three more frigates. The benefit of our competitive tendering policy was clearly shown in the extremely keen prices offered, which are significantly lower in real terms than previous ships. The benefits of privatisation of the yards and the greatly improved productivity now ensure better value for money for our own defence expenditure and help the yards themselves to compete once again overseas, as the opportunities with Malaysia and Oman have shown.

Before I turn to the outcome of the competition, I remind the House that the contract with the shipbuilder is for less than half the total estimated cost of the frigates. The larger part is made up by the host of specialised equipments that such a frigate contains. For some of those, contracts have yet to be awarded. But some are already known; for instance, the ships' 4.5 in gun will be ordered from VSEL—Vickers Shipbuilding and Engineering Limited—in Barrow, the machinery control equipment from Vosper Thornycroft in Porchester, the vertical launch Sea Wolf missiles from British Aerospace in Bristol. The two Spey gas turbine engines for each ship will be ordered from Rolls-Royce at Coventry, main gearing from GEC, Rugby and diesel generators from Paxman Diesels at Colchester. The shipbuilder will itself also have many sub-contractors. Hundreds of firms across the United Kingdom, large and small, will benefit from this order over the next few years, and its value will approach about £400 million.

On the results of the competition, I can tell the House that the tenders produced a winner by a very clear margin. We have accordingly decided to place a fixed-price contract for three type 23 frigates with Yarrow Shipbuilders on the Clyde. The construction of the first ship will start in the second half of this year. These ships will join the Duke class and will be named HMS Somerset, HMS Grafton and HMS Sutherland.

This is very good news for Glasgow, for Scotland as a whole, and for all the companies involved throughout the country. I recognise that it is, equally, a disappointment for the other yards which had tendered for the work, and for the people in those areas. However, this type 23 order is but one part of a substantial on-going programme of vessels for the Royal Navy. This will include a new anti-air warfare frigate, a second batch of Trafalgar class submarines and other significant vessels to ensure that we maintain a modern and effective navy in the future.

This order brings to 13 the number of type 23 frigates ordered since 1984, and the number of vessels ordered for the Royal Navy since 1979 to 71. It is yet more evidence that the Government are committed to ensuring the capability of the Royal Navy's fleet and to the wider aim of ensuring that our forces of the future have the modern equipment that they need.

Mr. Martin O'Neill (Clackmannan)

I thank the Secretary of State for his welcome statement, made with great promptness, given the time scale. I offer my congratulations to the workers and management of Yarrow, who have picked themselves up after the bitter disappointment of losing the last order, despite having built the first of class and many of the subsequent ships.

Can the Secretary of State give the fabrication start date, an important issue for the progress of work for the yard and for the timetabling of entry into service? What does the right hon. Gentleman consider to be the size of the fleet? It has been postulated at "around 40". Perhaps he is now in a position to be more precise. When will the tendering process be opened for the craft to which he referred in his statement? That must be of great concern to the yards which were not successful in the tendering process, whose problems will become similar to those that confronted Yarrow until this afternoon. When does the right hon. Gentleman expect the next tranche of type 23 orders, to which he did not refer in his statement, to be in the pipeline and when can we expect the next round of tendering to start for those?

Mr. King

I am grateful to the hon. Gentleman for those comments. He recognises this for what it is—solid confirmation of the Government's determination to invest in the defence of our country. I will not go further than to say "around 40", but we certainly intend to implement the programme that we set out in "Options for Change". I can confirm that other ships are under way. We have a project definition of the landing platform dock. At present, other matters are proceeding, but I can tell the hon. Gentleman—I am grateful to him for seeking clarification—that in respect of a further order for type 23s, I expect that to be at a broadly similar interval comparing this with the previous order that was placed.

Several Hon. Members


Mr. Speaker

Order. I say again what I said before business questions, namely, that there is heavy pressure on the next two debates. I shall allow questions to continue until 4.30, after which we shall have to move on to the debate.

Mr. Peter Viggers (Gosport)

Does my right hon. Friend agree that the fact that the machinery control order is to be placed with that fine company, Vosper Thornycroft, will be very good news in south Hampshire? Does he further agree that the fact that 71 vessels have been ordered by the Ministry of Defence since 1979 confirms what my hon. Friends and I have always believed—that under the present Government the Royal Navy will continue to play an important role and provide a fine career in the foreseeable future?

Mr. King

I certainly confirm my hon. Friend's comments about the quality of the work at Vosper Thornycroft, which is the basis of its competitiveness and why it has achieved the order placed directly by my Department. It confirms our commitment to a substantial number of ships in the future. Hon. Members could easily have been misled by referring to a previous Hansard which shows that a substantial number of ships are on order but fails to reflect the Government's commitment to naval shipbuilding. An unfortunate misprint in Hansard says that the value of the ships on order is £4.6 million whereas the correct answer should have been £4.6 billion.

Mr. Menzies Campbell (Fife, North-East)

It would be churlish to do anything other than welcome unreservedly the Secretary of State's announcement, and I willingly do so. He will appreciate that there will be not only a sense of relief at Yarrow, but a great sense of pride that the company has been entrusted with that order. The Secretary of State mentioned in his statement the disappointment that others might feel. When will he be in a position to make a firm announcement about the placing of an order for the fourth Trident submarine?

Mr. King

I am grateful to the hon. and learned Gentleman for his comments. My announcement is a tribute to the shipyard's competitiveness and productivity. I remember walking round that shipyard some 30 years ago. A transformation has taken place in the productivity of British shipbuilding because of privatisation, because there was no bottomless pit to which shipyards could turn, and because of the sheer reality that none of those yards would exist unless there had been a quantum change in working practices. The competitive procurement policy of the Ministry of Defence has been good news not only for the Ministry and the taxpayer but for the yards. A discussion is currently taking place on the contract for the fourth Trident boat. We intend to proceed and shall resolve the contract at the earliest possible date.

Mr. Neville Trotter (Tynemouth)

It is clearly in the interests of the Royal Navy and of the taxpayer that there should be competitive tendering to obtain the lowest price. Will my right hon. Friend give me a categorical assurance that that order was decided solely on price? Would the cost have been significantly higher if the order had been divided? Finally, is it still the Government's intention to proceed with ordering a large helicopter carrier, known as an aviation support ship? Swan Hunter's experience of shipbuilding for the navy makes it well placed to win a contract.

Mr. King

I can confirm my hon. Friend's first point. Nobody has fought harder than he for the interests of the shipyards of the Tyne and for Swan Hunter. I know that today's announcement will be a disappointment for them, and that those on the Tyne recognise that the response to all that they asked for previously was fair play. Yarrow was a clear winner in the competition. I also confirm that a clear benefit is that of batch ordering. We did not merely see three ships come sailing by: ordering in threes has shown significant benefits and economies. Furthermore, we intend to invite tenders for the building of an aviation support ship shortly. That is of great interest to my hon. Friend and to other hon. Members, and Swan Hunter will clearly be one of the real contenders for that.

Mr. George Galloway (Glasgow, Hillhead)

As Yarrow is the flagship in my constituency and the biggest private employer in the whole of Glasgow, I hope that the Secretary of State will accept my sense of relief and—yes—gratitude that the Ministry has made that decision today. I am also grateful for the Secretary of State's confirmation that the order was won on merit and is a testament to the ability and dedication of the management and work force at Yarrow Shipbuilders. When the Secretary of State worked in Glasgow in a previous life, he grew to know the value of the stamp, "Clyde-built". Today's order confirms that. When is the work likely to start? Notwithstanding the good news, many hundreds of the workers at Yarrow Shipbuilders have already gone down the road and it would be helpful if we could proceed quickly.

I have just one quibble: could we not consider naming the ships HMS Stewart, Lang and Forsyth in memory of three Ministers who, notwithstanding that good news, are likely not to be in office much longer?

Mr. King

I am appalled at the flippant way in which the hon. Member addresses the serious matter of the continuing equipment of the Royal Navy. I can confirm, however, that the company would not have won this order except as a private sector yard which will have to incur the costs if it makes losses. Such losses will be borne, not by the Government, but by the company. I do not think that it is in any way insulting to say that the epithet, "Clyde-built", which was a badge of quality in the last century, was getting somewhat tarnished during the post-war years. The efforts of the management and the work force now in the shipyards on the Clyde and in Yarrow's have done a great deal to restore that badge of quality, which was in danger of slipping away.

Sir Hector Monro (Dumfries)

Does my right hon. Friend appreciate that this is wonderful news for Glasgow and for Scotland and a great tribute to the work force and management, some of whom were in the House this week to meet an all-party group? As we have had some rather rough news in the past few weeks, it is a real shot in the arm and the country will be grateful for the announcement.

Mr. King

I am grateful to my hon. Friend and he is right to recognise the importance of the announcement. He is right also to say that the value is not just for Yarrow. Hundreds of subcontractors, in Scotland as in other parts of the country, will benefit from this announcement. My hon. Friend will also know the value of the more competitive and effective approach of the yard. It is currently in the final stages of negotiations for a very important order from Malaysia which, had it not been the competitive and effective yard that it now is, it would have had no chance of getting.

Mr. Frank Field (Birkenhead)

The Secretary of State said that he was mindful of the atmosphere in yards which had competed and failed. Will he share with the House his thoughts about the atmosphere that he thinks will now prevail in Cammell Laird, which finds itself unable to compete for naval orders? Is he aware that, under British Shipbuilders, Laird's was classified as a naval yard, and other yards not so classified were given intervention funding? Laird's now has to go into battle without any chance of getting either naval orders or intervention funds. Does the Secretary of State believe that the action of the board of Vickers Shipbuilding and Engineering Ltd. in disqualifying us from competing for this work is fair to Cammell Laird? What does he think that that does for the Government's competition policy?

Mr. King

I understand very well the point that the hon. Member raises, having worn another hat previously when a major shipyard was one of my biggest concerns. The question whether one had a naval involvement or access to the intervention fund was very critical indeed. That yard, privatised and sold to a new owner and with access to the intervention fund, now has a substantial number of new orders. I would rather not answer across the Floor of the House the serious point that the hon. Member has raised, but I will certainly look into it and come back to him.

Mr. Cecil Franks (Barrow and Furness)

While the Secretary of State's announcement is good news for Yarrow and the Clyde, it is none the less a disappointment for the other three shipyards that submitted tenders, not least VSEL in Barrow, although the order for the 4.5 inch gun would be welcome.

The Secretary of State referred to Trident. To pursue the question put by the hon. and learned Member for Fife, North-East (Mr. Campbell), the Secretary of State will be aware that the long lead orders for the four Trident submarines were placed some time ago and that construction is quite well advanced. Is he able to elaborate on the answer that he gave to the hon. and learned Member for Fife, North-East? Can he say how evaluation of the tender is progressing? I understand that progress is good. Can he give some sort of time scale, given good will on both sides, and when the order may be expected to be placed?

Mr. King

I obviously understand the disappointment. There is no question but that VSEL strived genuinely to compete for the order, and put in an effective bid. Unfortunately, from the company's point of view, it was not so competitive as that from Yarrow, but it was certainly a very responsible offer. I am pleased that the hon. Gentleman acknowledges that the outstandingly successful 4.5 inch gun produced by VSEL is a source of further valuable orders for it.

As my hon. Friend rightly said, the construction of the 08, the fourth boat, is currently under way and authorities have been given for the long lead items. The contract is being evaluated. The House will understand that, although we prefer these matters to be resolved by competitive tendering, in this case we are effectively talking about a single supplier, so it is vital to get the contract right. That is why we must ensure that the contract is properly dealt with—otherwise, the Public Accounts Committee, among other bodies, will have a lot to say. We must deal with the matter carefully. I am anxious that the question should be resolved as soon as possible. Although I cannot give a date, we intend to proceed just as soon as we can resolve the question of the contract.

Mrs. Maria Fyfe (Glasgow, Maryhill)

As a Glasgow Member, I add my own expression of delight and relief, and I congratulate the Yarrow management and work force. They certainly deserve their success. Anyone who has spoken to them recently knows of the problems with which they have had to cope. May I add one small point? I was surprised to hear the proposed names for the three frigates. As the memory of the clearances lingers in Scotland, I suggest that the Duke of Sutherland is perhaps not the most popular name that could have been chosen.

Mr. King

Given that the announcement is outstandingly good news for the hon. Lady and her constituents, it is unfortunate that she should wish to introduce a divisive note.

Mr. James Hill (Southampton, Test)

I congratulate Yarrow on its good fortune in securing a contract for three ships at once, but I must express some dismay on behalf of Vosper Thornycroft, Southampton, which has built many naval ships in the past.

I have a query about the fibreglass minesweepers. I understand that my right hon. Friend has just been to Oman, so perhaps he can give the House some information. Vosper Thornycroft, Southampton, is anxiously waiting for confirmation of the order from the Sheik of Oman for a fleet of minesweepers.

Mr. King

I confirm that I returned from the Gulf late last night. I spent some time in discussion in Oman, not about the minesweepers but about the much more valuable corvette order that the Omanis are seeking to place, and I was given very satisfactory assurances by His Majesty the Sultan about those orders. Details remain to be resolved and I hope that it will be possible to resolve them quickly.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

When the Secretary of State listed the areas that would benefit from today's announcement, he made no mention of Tyneside. He has now ordered 13 type 23 frigates, four of which either were or are under construction at Swan Hunter on Tyneside. I understand that type 23 frigates are grouped in fours around the fleet auxiliaries. AOR1 is the first auxiliary oil replenishment vessel and AOR2 is currently being constructed on Tyneside. As the Secretary of State has now ordered 13 type 23 frigates and has only two AOR vessels, does he not need to order another AOR vessel? When will he make an announcement about AOR3?

Mr. King

I do not have any comment to make on that ship at the moment, but the hon. Gentleman will have heard what I said to my hon. Friend the Member for Tynemouth (Mr. Trotter) about the aviation support ship, for which Swan's is obviously one of the real contenders. That could be an important ship for Swan's. I took the trouble to look at what the hon. Gentleman said last time, when Swan's was successful. He said magnanimously, "All that we ever ask for is fair play." I can assure him that fair play is what he has got in this case. I am sorry that he is disappointed that the order did not go to Swan's, but I can assure him that there was fair play and it has gone to Yarrow.

Mr. John Pawsey (Rugby and Kenilworth)

Is my right hon. Friend aware that the order and the announcement will be widely welcomed, particularly by the work force and managment of GEC, Rugby? It is good news for jobs and it is good news for the town. Can my right hon. Friend say what is the global worth of the contract, and does he agree that it represents a vote of confidence in British engineering?

Mr. King

I can confirm that. This statement differs from previous statements in that it spells out the main contractors. There is a tendency for people to approach this matter as though it were one entirely for the shipyard concerned. In fact, the larger part of the value of the contract is not in the hull itself but in the components, a significant proportion of which will be provided by GEC in Rugby. Obviously, for commercial reasons, I cannot disclose individual contract values. However, I can confirm that the overall value of the ships with equipment that I have announced today approaches £400 million.

Mr. Peter Archer (Warley, West)

Will the right hon. Gentleman ensure that his Department takes an adequate interest in the subcontracts? Is he aware that the chain and cable industry in this country is widely accepted as being the best in the world in terms of both technology and workmanship? Will he ensure that it is not unfairly excluded as a result of the foreign dumping of inferior chain?

Mr. King

I am interested to hear that, and I will certainly look into it.

Mr. Jonathan Sayeed (Bristol, East)

My right hon. Friend will be aware that HMS Norfolk—the first of the Duke class—has been accepted into the fleet and has been completing work-up at Portland. Past colleagues of mine who are still serving in the Royal Navy tell me that she is an outstanding success and a tribute to British shipbuilding. Indeed, she is a foretaste of what we shall be getting in these other ships. Is my right hon. Friend aware that his announcement about vertically launched Sea Wolf will be most welcome to British Aerospace in Bristol? I know that in this regard my feeling will be echoed by my hon. Friends with responsibility for Bristol constituencies. It is regrettable that, yet again, the Labour Member for Bristol has not bothered to turn up.

Mr. King

I did notice the absence. I know that my hon. Friend, who takes a close interest in these matters, understands the importance to Bristol and to British Aerospace of this decision and this order. Bearing in mind his experience and his information, I am pleased to hear his tribute to the quality of HMS Norfolk—as it happens, the first of class, built at Yarrow. The news that my hon. Friend has given the House is encouraging.

Mr. Dick Douglas (Dunfermline, West)

Does the Secretary of State accept that this news is very welcome indeed? It is a tribute not only to the management at Yarrow but to the workers, who have spent a long time removing ill-considered demarcation practices—and it is as a shipbuilder that I say that. Will the Secretary of State concede that one of the things that this will enable Yarrow to do is to keep its essential design capability, illustrated by the fact that it produced the first of class? Will he continue to allow it flexibility in respect of other markets?

Mr. King

I note what the hon. Gentleman says, but I have to make the point that it will not be possible to keep any design capability, any warship-building capability or any manufacturing capability for the sort of defence components that we need unless the Government are prepared to fund the defence programme at a sensible level. While I am far too gentle and decent a person to criticise any Opposition Member who has joined in the expressions of appreciation of this action, I have to say, in the kindest possible way, that if the defence policies to which the Opposition subscribe—I include all the Opposition parties—were implemented, we should not be ordering a rowing boat, let alone three frigates.

Mr. David Martin (Portsmouth, South)

I am grateful for my right hon. Friend's statement because it demonstrates the Government's commitment to a better equipped fleet for the future, even though the fleet manpower is contracting, and because jobs will be provided in the Portsmouth travel-to-work area. Many people wish to write down the opportunities which exist, but under the present Government there is a future for many of the defence-related industries in my area.

Mr. King

I am grateful to my hon. Friend who, I know, appreciates the situation very well. We have announced changes, including some reductions in numbers. It is true that the new type 23s, because of their greater capability and efficiency, will operate with smaller crews. They show very clearly that the Government are ensuring that, while we may reduce the personnel numbers in our armed forces, we are increasing the relative proportion of funds spent on their equipment to ensure that in the future they have the equipment that they need to perform the tasks that we set them.

Mr. John Home Robertson (East Lothian)

I join the whole House in paying tribute to the work force and management at Yarrow on winning this vital order against such stiff competition. Can the Secretary of State confirm that the competition was won on price? And can he reveal whether the tendering process says anything about the level of profits being made by VSEL in the manufacturing and construction of Trident submarines?

Mr. King

No, I cannot comment on that, but it is relevant to the contract negotiations for Trident 08—we must protect the public Exchequer precisely from the problem of a monopoly single buyer.

I can certainly confirm that the contract was placed on merit; it was won by a clear margin in a competitive tender.

Mr. Lewis Stevens (Nuneaton)

Does my right hon. Friend accept that this is good news for the Ansty Rolls-Royce plant in my constituency which manufactures Spey engines? This is welcome news for the employees and management of that company. Will he also accept that his demonstration of confidence in the plant's high quality power unit is most important for the company when it seeks orders abroad?

Mr. King

I am grateful to my hon. Friend. It is certainly true that the Spey engines have proved an outstanding success. The Royal Navy has great confidence in them and they were chosen for their quality, flexibility and efficiency. They have stood the Royal Navy in good stead. It is because of our defence programme's ability to maintain an effective ordering programme that we can also attract interest among overseas countries. What we invest in is always of great interest to such countries. They know that if an item has the Royal Navy's endorsement it is bound to be of good quality.

Several Hon. Members


Mr. Speaker

Order. I will certainly look with compassion in days to come on the three hon. Members whom I have not been able to call on the statement, but we have a busy day ahead of us.