§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Greg Knight.]
§ 10.2 pm
§ Mr. John Hutton (Barrow and Furness)British manufacturing industry is absolutely vital to our future if we are to be a successful trading nation. Two recessions in the past decade have caused enormous damage to our manufacturing base, and some of our finest companies have been forced to sack thousands of skilled workers— workers the country can ill afford to lose.
Within manufacturing, the engineering industry in particular has been badly hit. Until recently, one important sector of engineering largely escaped the ravages of the past 13 years—the defence sector, which in many ways represents the very best, the finest, of British engineering, with world-class design, development and production facilities, and with the finest skilled work force of its kind in Europe. Sadly, this vital sector of engineering is now at risk as a result of what I have to describe as the haphazard and random cuts being forced through by the Treasury. These cuts not only threaten huge additional redundancies amongst defence workers but also, I believe, call into question the maintenance of Britain's strategic defence industries and the ability of a future British Government to call upon our indigenous defence industrial base to meet our national defence requirements.
I do not believe that these are exaggerated claims. Redundancies announced recently by defence contractors largely make the point. In recent months we have had the declaration of 4,000 redundancies at Lucas Industries, 3,000 at British Aerospace and the closure of the works at Hatfield, nearly 600 at Rolls-Royce Aero Engines in Coventry, 400 at Marconi Underwater Systems, nearly 1,000 at Cammell Laird, and the closure of one of the finest British shipyards. Some 1,300 jobs have been lost recently at Royal Ordnance plc, 1,200 jobs have been lost recently at Swan Hunter on the Tyne and 400 jobs were recently lost in my constituency at the Vickers shipyard in Barrow.
The list is dismal and it spells misery and insecurity for thousands of defence workers and their families. The combined total of job losses in the defence industries over the past two years reaches the staggering total of almost 80,000.
Let us consider some of the consequences of those redundancies in the defence communities. Some of the findings are truly startling. In my constituency, the consequences and effects of unemployment have already had a devastating impact. The number of people claiming sickness benefit is rising rapidly in my constituency—twice as fast as in other comparable towns in the northern region. The figure has risen by 30 per cent. in the past 18 months. There are almost 100 new claims for sickness benefit every week, which is three times the national average. Stress-related illnesses have risen and the suicide rate has increased fivefold among young men in my constituency. More tranquillisers are prescribed in my constituency than anywhere else in Cumbria.
Why should defence workers be forced to pay the price for the peace dividend? Their contribution to the nation's defence has always been exemplary. Now that the cold war is over—hon. Members of all parties welcome that—it is completely unacceptable that their service to the nation is 472 being rewarded in this way. It is being rewarded by unemployment and ill health, as the experience in my constituency has clearly shown.
The Opposition recognise the need for defence spending to reflect the new security requirements of Britain and of our NATO allies. I am sure that that is common ground between us. My criticism of the Government is that there is no sign and as yet no evidence that they have appreciated the need for strategic planning in phasing down present levels of defence spending or that they have any coherent approach towards dealing with the surplus capacity in the industry.
We may have arrived at the kernel of the problem. It is not true to say that there is surplus capacity in the defence industries. I argue that we now have released capacity. We have under-utilised capacity in this sector of the engineering base. It is tragic that the Government are not able to develop any coherent policy for dealing with the extra capacity in the defence industries. With imagination and resolve, that under-utilised capacity could be saved for the benefit of the United Kingdom engineering and manufacturing industries and, most importantly, for the long-term future of many defence-dependent communities.
Two years after "Options for Change", there are significant redundancies in the defence industrial base of Britain. Major redundancies are still to come. It has been estimated that as many as 125,000 further defence workers will lose their jobs over the next five years. That is appalling. To date, the Government have shown no strategic ability to plan for the future of the British defence industrial base.
There is a real risk that we are coming close to a melt-down. Strategically important British defence companies are shedding workers at an alarming rate. European defence companies are not shedding workers in the same numbers as British defence companies are.
§ Mrs. Ann Winterton (Congleton)I commend the hon. Gentleman on choosing this subject for his Adjournment debate tonight. He briefly mentioned Royal Ordnance. Is he aware that I have a small arms manufacturing capacity at Radway Green in my constituency? Is he aware that it is a strategically important industry? If the Government do not provide orders for that factory, we shall not be able to manufacture small arms ammunition any more in this country; we shall have to rely on being supplied from overseas. Is he aware of the importance of orders coming to Radway Green so that the factory can plan its production and capacity for the future?
§ Mr. HuttonI absolutely agree with the hon. Lady. There is no doubt that Royal Ordnance lies at the centre of Britain's defence industry; it is impossible to imagine an indigenous defence industry in this country without a buoyant and vibrant Royal Ordnance, with sufficient orders and employing the skilled workers in their factories. In particular, I know the importance of the establishment in the hon. Lady's constituency. So we are in complete agreement about the significance of Royal Ordnance and its central role in Britain's defence industries.
It is worth pointing out—I am sure that the hon. Lady is fully aware of this—that there have been more than 10,000 redundancies at Royal Ordnance since it was privatised in 1987, despite significant improvements in 473 productivity and the increased ability of Royal Ordnance to turn orders into deliveries in a short time. I hope to deal with Royal Ordnance in greater detail shortly.
We are in a serious situation. As I have said, we are close to a melt-down, and I stick to that. The British defence industry has suffered significant and heavy losses of its key, skilled industrial work force, particularly Barrow and Furness where we have lost more than 6,500 workers from the VSEL shipyard since October 1990. My understanding of the redundancies from Vickers leads me to conclude that it is the most important and highly skilled engineering workers who are the casualties of the heavy job losses from that work force. It is impossible to imagine shipyards like VSEL and Swan Hunter on the Tyne being able to survive into the next century while sustaining the present high level of redundancies amongst its key industrial workers.
In the context of Royal Ordnance, it is very important that there is a speedy renewal of the ammunition and equipment purchasing agreement. In the past five years, Royal Ordnance has demonstrated its ability to change, and it is worth pointing out that there is full co-operation between the trade unions at Royal Ordnance and the management of the company in trying to achieve some of the new targets facing them in very difficult trading circumstances.
Therefore, I hope that the Minister can give some assurance tonight to the House and to many thousands of workers throughout the country that a speedy renewal of the agreement is imminent because, without it, there is a real fear among the Royal Ordnance work force of further substantial and, I believe, unjustified redundancies. As the hon. Member for Congleton (Mrs. Winterton) has made clear, that will result in an increased reliance by the British armed forces on equipment and supplies from foreign contractors. On defence grounds, quite apart from social and employment considerations, that is an extremely unhealthy situation for the British armed forces to find themselves in.
I hope that the Minister can also make some clearer commitment to the House tonight about the state of various important naval procurement decisions that need to be taken without further delay, and, in particular, three decisions that many Opposition Members expect shortly —the launch platform helicopter vessel and the two launch platform docks.
§ Mr. Stephen Byers (Wallsend)May I take this opportunity to congratulate my hon. Friend not just on his selection of this topic for debate on the Adjournment but on the way in which he has addressed the concerns of many people in many constituencies and not just those of his own constituency, Barrow and Furness. Having said that, I make no apology for addressing my remarks solely to Swan Hunter, in my constituency of Wallsend. My hon. Friend referred to the helicopter carrier that we are all aware is a vital order. It is particularly vital to the future well-being of Swan Hunter. Swan Hunter has sought to diversify into the merchant shipbuilding sector but has been denied access to European Community intervention funding; it must, therefore, rely on Ministry of Defence orders.
We know that, for the Royal Navy, the helicopter carrier is a top priority. It is also a top priority for the 474 people of the north-east, and we want an indication from the Minister tonight that the order will be placed as soon as possible, because we are confident that it will be won by Swan Hunter and thereby keep jobs in Wallsend and bring new hope to the riverside communities on the Tyne.
§ Mr. HuttonI agree with my hon. Friend. The Swan Hunter shipyard on the Tyne is without doubt a centre of world-class engineering excellence. Many of my hon. Friend's constituents will be anxiously awaiting what the Minister has to say about the landing platform helicopter order.
It is also worth bearing in mind the importance to the Navy and to what is left of the British naval shipbuilding industry of the orders for landing platform docks. That matter is of concern to my constituents, as too is the order for the batch 2 Trafalgars. Many of my hon. Friends and I are concerned that one of the changes resulting from "Options for Change" is the substantial reductions in the number of submarines serving in the Royal Navy. Many hon. Members will be concerned that 12 SSNs— nuclear-powered submarines—might not be sufficient for the Royal Navy in future.
Will the Minister give an assurance that the very minimum order for the Batch 2 Trafalgars will be sufficient to replace all the aging Swiftsure class of SSNs? That is a matter of great and direct interest to the future prosperity of my constituents. Without any doubt, the VSEL shipyard in Barrow is the finest manufacturer of submarines in the world.
In addition to those decisions on naval procurement decisions, there should be some help for companies that now find themselves without any MOD work at all or with declining volumes of MOD work. I have noted the responses that the Minister's right hon. Friends have given in response to questions in the House on this matter, but it is not good enough for the Ministry of Defence to say that it is up to defence contractors to respond to their changing needs on their own without any assistance from the Ministry of Defence or other Government Departments.
Many of those suppliers have provided equipment for the defence of this country, often at very short notice—for example, during the Falklands crisis. It is not the proper reward for the service that those companies have rendered to the country over many decades for Ministers now to say that it is up to those private companies to sort out the problem on their own. Those companies have been sole suppliers for the MOD, often for decades—for generations in many cases, as is the case with the shipyard in Barrow. They therefore look to the Ministry of Defence and, legitimately, to the Government to provide them with practical assistance at this moment.
There is a crisis for many important engineering defence contractors. We simply cannot make many of those necessary changes and adjustments on our own. I ask the Minister to consider seriously that it is not a reasonable response for him and his right hon. Friends consistently to say to defence contractors such as VSEL in Barrow, "You are on your own." People in my constituency do not consider that that is anything like a sufficient response from the Government.
The Minister and his Department should be developing a policy in conjunction with other Government 475 Departments to manage the painful process of change before irreversible damage is done to the foundations of Britain's engineering defence industries.
§ Dr. John Reid (Motherwell, North)I am grateful to my hon. Friend the Member for Barrow and Furness (Mr. Hutton) for raising this subject and also for giving me a short period—I promise—in which to make one important point. I shall be brief, because the Minister will want to respond to a number of points. The issue that I raise is the state of the royal ordnance factories, and in particular two outstanding contracts which, quite frankly, the Government have dithered over for a considerable period. The first issue is the L106, which is the contract for fuses. Last week, I visited Chorley and Blackburn factories. The management and the work force there as well as at other factories throughout the country are desperately worried. The management of Royal Ordnance factories and their workers and I expect an extremely early announcement. I hope that the Minister is able to respond tonight.
On the L106, if the Minister provides only a contract or a tender for a 12-month period, it will place Royal Ordnance plc at a tremendous disadvantage as it will have to spread the load of reduced expenditure and reduced purchasing over a five-year period at least to avoid the worst effects of the decline in defence procurement for the RAF.
The second and more general issue is an even greater scandal. It is the replacement for the explosives, propellants and related products agreement five-year contract which was placed with Royal Ordnance just after privatisation about five years ago. In other words, for five years the Government have had the full knowledge that the contract will finish in March. Anyone who knows the industry is well aware of the importance of putting a contract out to tender early. Royal Ordnance plc is not frightened of competition.
The contract should be for another five years to give Royal Ordnance the opportunity to compete on an even playing field. It should also be comprehensive, as was the EPREP contract. That would give Royal Ordnance the opportunity to tender for a range of ammunition. If the contract is short term and for specific pieces of ammunition, rather than comprehensive, Royal Ordnance will be placed at a disadvantage to its foreign competitors.
The hon. Member for Congleton (Mrs. Winterton) mentioned the difficulties which her factory at Radway Green will face. There is a reduction in the demand for ammunition from that factory of more than 70 per cent. We cannot possibly expect a Royal Ordnance factory to base its future projections merely on next year's figures. When there is a 73 per cent. reduction in the demand for ammunition and no comprehensive, long-term offer for a range of ammunition over five years is put out to tender, Royal Ordnance will be competitive.
I am sure that I speak for hon. Members on both sides of the House when I say that the Minister should be able to give a definite response to our questions. In one case there have been delays for months. In another case, the Government have had five years in which to decide what they will do. If they do not know now, they will never know.
§ The Minister of State for Defence Procurement (Mr. Jonathan Aitken)As is traditional on these adjournment debates, I begin by congratulating the hon. Member for Barrow and Furness (Mr. Hutton) on his good fortune in raising such an important subject for debate today. The hon. Gentleman represents a higher proportion of constituents who are involved in the defence industries than any other hon. Member in the House. He has certainly been a most assiduous and energetic Member in championing their cause in debates and in representations to Ministers.
Some of the points which the hon. Gentleman made verged on the exaggerated and the melodramatic. It was totally uncharacteristic to hear such a tremendous trumpeting, even from the new, modern Labour party, of the need to spend taxpayers' money on defence in the ways suggested by the hon. Gentleman. I should not be surprised. The first time that I heard of the hon. Gentleman was during the election campaign when, with a great flash of excitement, he described the Opposition spokesman on defence as ignorant and ill-informed.
§ Mr. AitkenIt was the Opposition spokesman on foreign affairs. There was a small choice in rotten apples, as Shakespeare used to say. The particular rotten apple to which the hon. Member for Motherwell, North (Dr. Reid) was referring was the Opposition spokesman on foreign affairs. On one occasion when the Opposition spokesman on foreign affairs was speaking on defence matters, he got it entirely wrong and was condemned.
One would not think that one was addressing a party which had voted at its national conference for swingeing cuts in defence expenditure which would be equivalent to £6 billion. There is a remarkable difference between the quiet voice in the Adjournment debate of an hon. Member representing defence constituencies and the noisy voice of the Labour party conference bellowing for greater cuts.
§ Mr. HuttonSurely the Minister is not saying that I have a quiet voice on such matters. He described comments which I made previously in another context.
§ Mr. AitkenI certainly do not accuse the hon. Gentleman of inconsistency. I was simply saying that there are great splits and inconsistencies in the Labour party. I also suggested that there was a touch of exaggeration in some of the language he used.
It is not correct to say that a meltdown is taking place in our defence industries. The hon. Gentleman painted a picture of suicides, tranquillisers and a meltdown. The reality is that our defence industries face difficult times. With the changed security environment, we must reduce our defence budget by some 10 per cent. over three years. That is a serious reduction, but it is not such a dramatic reduction as that with which many other industries have had to cope.
As some compensation for those industries, we have a booming defence export side. British companies are showing satisfactory successes around the world. They now secure some 20 per cent. of the world export market, which is equivalent to about £4.5 billion a year. If one adds together our total domestic defence spending of some £9 billion on equipment and the burgeoning success of our exports at £4.5 billion, that is a £13.5 billion-a-year defence 477 industry, which is a long way from a meltdown creating suicides and the melodramatic scenario sketched by the hon. Gentleman. Having said that, of course there are real problems. Several perfectly valid and fair points were raised tonight and I shall do my best to answer them in the short time that remains to me.
I was asked several questions about Royal Ordnance. In addition to the points made by the hon. Member for Motherwell, North (Dr. Reid), my hon. Friend the Member for Congleton (Mrs. Winterton) raised a valid point. She came to see me with several of our hon. Friends and made some effective representations, to which I listened carefully.
Royal Ordnance is a fine British company which has been given the benefit of the explosives, propellants and related products agreement for the past few years. I have considerable sympathy with the difficult position that it will face as expenditure on defence equipment reduces by some 10.5 per cent. in the next three years. The force levels on which our planning is based mean that a reduction in ammunition orders is unavoidable.
A rationalisation of the facilities of Royal Ordnance was recently announced by the company. That is a matter for the company, but I have noted that British Aerospace has said that it remains committed to a strategy of extending the scope of its presence in the defence market, with Royal Ordnance playing the lead role in the land systems sector. I am sure that, if Royal Ordnance continues to make good progress in increasing its competitiveness, its products will continue to win orders from both the Ministry of Defence, its domestic customer, and overseas customers.
On the specific question of the EPREP agreement, I informed the House on 8 December that we did not intend to negotiate a successor agreement. The EPREP agreement was acknowledged from the start to be an interim agreement designed to give the newly privatised company a degree of certainty about its future business for five years. That was done so that it could achieve economies by rationalising and modernising its factories. That policy has been successful. It is now time for my Department to move, as was always the intention, to fully commercial arrangements with the company in accordance with our long-standing procurement policies.
To this end, as I said in the House on 24 November, we have investigated the possibility of placing longer-term ammunition contracts. That is the very point which the hon. Member for Motherwell, North raised today. I am pleased to announce to the House that I have decided to follow that route. The Ministry of Defence contracts bulletin to be published on 3 February will include details of a package of ammunition requirements for delivery over a five-year period from 1993 to 1998. I expect that the majority of those orders will be won by competition.
The quest for value for money remains at the centre of our approach, but the longer-term contracts will help to secure the armed forces' sources of supply of key types of ammunition, as well as giving industry and particularly Royal Ordnance much greater confidence and greater opportunities to plan ahead with security. I hope that my hon. Friend the Member for Congleton and other hon. Members who have raised the matter will be encouraged that we have moved in the direction that they sought.
478 Next, I was asked about some naval orders. The hon. Member for Wallsend (Mr. Byers) asked me for the current position on the landing platform helicopter, which I acknowledge is of great interest to the fine company of Swan Hunter, many of the employees of which work in the hon. Gentleman's constituency.
Tenders for the LPH were received by 1 October last year. An announcement of the outcome of the tender exercise will be made following the full evaluation of the tenders received. That is not likely to be before the autumn this year. That is the normal time that it takes to evaluate such major tenders. That amount of time is needed because we must make a proper evaluation to ensure fair competition and best value for money.
I am afraid that it is highly unlikely that the order will be advanced. The LPH is expected to enter service in the second half of the decade.
§ Mr. ByersThe Minister will understand the importance of the timing of the order. I hear what he says about the need to evaluate properly the tenders that have been received. May I urge him to make haste in evaluating the tenders. It is important to Swan Hunter that the date is brought forward, if possible from autumn this year. Will he give an undertaking that he will at least consider the possibility of proceeding with greater haste in order to bring forward the placing of the order?
§ Mr. AitkenI shall consider the hon. Gentleman's request, because it is fair. We have a duty to be fair to other competitors, but I know of the great importance of the order to the shipbuilding industry and to Swan Hunter and we shall do what we can, although I cannot hold out any great hope at this stage of making unduly remarkable, or particularly rapid progress.
§ Dr. David Clark (South Shields)Will the Minister confirm, once and for all, that the Government will definitely make that order and that it will be for a new-build vessel?
§ Mr. AitkenNo Defence Minister can announce an order in advance of consideration of the tenders and of studying the financial position of the Ministry of Defence's budget at that moment. We have entered into the tender process in good faith and I have no reason to be anything other than positive about it.
I think that I have dealt with the LPH situation. I was also asked about the submarine force, which is of particular interest to the hon. Member for Barrow and Furness, who is the Member of Parliament for the great Vickers Shipbuilding and Engineering Company Ltd. As he is aware, the Government are determined that the principles of competition and sound procurement practice will apply to the future order of submarines. We are already planning for the replacement of the Swiftsures and VSEL has completed its contract for design option studies for a second batch of Trafalgars, known as the batch 2 T class, or sometimes B2TC, and we are considering the results of those studies.
Under sound procurement practice we must place a contract with a capable prime contractor and we think that that practice should be applied to the programme. We need and intend to have an adequate submarine force for the 21st century and we envisage the batch 2 Trafalgar class playing a crucial role in that process. We are now evaluating the studies produced by VSEL.
479 After some sound remarks about shipbuilding and Royal Ordnance, the hon. Gentleman switched to a familiar litany of the need for practical assistance—which decoded, means taxpayer's money—for defence diversification policy. I have to be very cautious and hesitant here, because the swords into ploughshares policy that the Labour party has espoused at various stages is not the business of Government or of taxpayer's money. The question of how we should respond to diversification—
§ The motion having been made after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at twenty-eight minutes to Eleven o'clock.