§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]
11.44 pm§ Mr. Simon Burns (Chelmsford)My constituents and I are grateful that I have an opportunity to raise an important issue in Chelmsford and in the constituencies of my right hon. Friend the Member for Braintree (Mr. Newton) and my hon. Friend the Member for Colchester, South and Maldon (Mr. Whittingdale).
The background to this short debate is somewhat contradictory, because, in the past two months, Chelmsford has benefited from a fall in unemployment, in both the local authority area and the parliamentary constituency, of 551 and 384 people respectively. Unfortunately, however, the good news created by those substantial and consistent falls in unemployment has been lost because of last week's announcement by Marconi Radar that, sadly, it had to make a further 300 people in Chelmsford redundant.
We have paid a heavy price for the peace dividend and a more peaceful world. It is ironic that those who are most critical of defence-related redundancies advocate even more defence cuts. The Labour party has consistently voted for a 27 per cent.—£6 billion—cut in the defence budget. The Liberal Democrats would like to see defence spending cut by 50 per cent.—half the defence budget—over the next seven years. Both policies would have an even more traumatic effect on defence industries in my constituency.
To understand the impact of the redundancies in defence-related industries in Chelmsford in the past 12 to 18 months, it would be sensible to put into context the history of the manufacturing base in the town. Chelmsford has always been associated with the Marconi companies, and many people in Chelmsford consider them to be synonymous. Twenty years ago, the Marconi companies and English Electric Valve were the town's major employers, providing jobs for 11,000 people with thousands of back-up jobs reliant on their success.
The 1989 census of employment shows that three quarters of Chelmsford's manufacturing jobs were in the standard industrial classification group 3, which includes engineering and vehicles. Employment in that group was dominated by the GEC companies: Marconi Communications; Marconi Radar; and English Electric Valve.
In the past 18 months, there has been an all too dismal repetition of job losses in those companies. In January 1992, 150 jobs were lost at Marconi Communications; in March 1992, 140 jobs were lost at Marconi Phone; in June 1992, 600 jobs were lost at Marconi Radar when it moved its manufacturing to Leicester; in June 1992, 225 jobs were lost at Marconi Communications; in September 1992, a further 300 jobs were lost at Marconi Communications; in February 1993, 95 jobs were lost at English Electric Valve; and now 300 jobs have been lost at Marconi Radar.
Almost 2,000 jobs have been lost in a relatively short time. I do not need to remind the House of the misery that that causes to the men and families directly involved, to the companies, which do not enjoy making people redundant, and to the town because of the knock-on effect those redundancies have on suppliers, back-up staff, shops and the area's commercial life.
1237 The men who have been made redundant are highly trained and desperate to be in work, contributing to our nation's manufacturing base and using their skills to the utmost degree.
There are two reasons for that dismal catalogue of redundancies. First, the ending of the cold war and the subsequent peace dividend, coming as they did so swiftly and unexpectedly with the crumbling of the Berlin wall and the iron curtain, have meant that we live in a relatively more peaceful world. Consequently, the Government have rightly had to reassess the defence requirement of this country.
Secondly, we as a nation have an excellent record in defence industry exports, but the peace dividend has coincided with a worldwide recession, which has meant that the market for defence equipment and communications worldwide has contracted, and that the competition has intensified. As part of the need to remain competitive or lose out even more, the Marconi companies have had to take drastic action.
What of the future? I have a number of suggestions, which I am pleased to make, to help to alleviate the short-term problems facing my constituents and to try to help to improve long-term prospects for defence-related industries. I welcome the fact the Government have signed up to KONVER, the European Community programme to provide financial assistance to areas suffering from redundancies in defence-related industries.
Chelmsford will compete for that money to help with reskilling and retraining. However, under the EC rules, two thirds of the money is designated on a criterion under which Chelmsford would not usually be able to compete. That is farcical. A recent university of York report for the European Commission on the economic and social impact of reductions in defence spending and military forces on the regions of the Community identifies Essex as the second worst-hit area in the EC.
First, it is imperative that the criterion is changed so that Essex can bid in all the categories of the KONVER funding. I know that work is being done at county level to come up with an excellent idea to use some of that money directly to help over the long term companies facing problems from a contracting defence market.
Secondly, the companies must continue to broaden their base by diversifying into non-military products. The companies have long recognised that, and for a number of years they have been doing all that they can to diversify as quickly as possible. Marconi Communications has had an ambitious programme of diversification for a number of years and has met success in supplying communications equipment to the BBC, to the Independent Broadcasting Authority and to clients worldwide.
Similarly, Marconi Radar and English Electric Valve are channelling their energies into diversifying while recognising that there will still be important defence contracts to be won. It should not be forgotten that the defence market has not disappeared, but has simply been reduced because of changing circumstances.
It is important for diversification that it is remembered that it is a slow process and means either moving into new markets against well-established competition or investing heavily and speculatively in trying to develop niche markets. Neither can be achieved overnight, and it is 1238 imperative that, during the period of uncertainty and realignment, the Ministry of Defence and the defence industries work closely together. At the end of the day, their needs are mutual. I am pleased that both the companies and the Ministry recognise that they need to co-operate because of mutual interests and mutual future benefits to both sides.
Thirdly, it is crucial that, whenever feasible, British contracts go to British companies to protect British jobs and British expertise. Once again, I congratulate my hon. Friend the Minister and his predecessor on ensuring that more than 90 per cent. of our defence contracts go to British companies. That is only right, because we must look after our own, as one can rest assured that no one else will.
In that respect, I make a plea for Marconi Radar with regard to the RAF tactical radar project. It would give a vital opportunity to put the Ministry of Defence seal of approval on an excellent new product with £300 million of export potential, which would protect jobs. It would also provide an opportunity to preserve unique skills and technology in this country. I fully appreciate that my hon. Friend the Minister is not in a position directly to comment on that, but in passing I wanted to make a constituency plea for the contract.
When the Ministry of Defence puts out tenders for contracts, it is important that they be dealt with swiftly—contracts for new products, for repair and maintenance, for spare parts or for updating and uprating equipment and services. I appreciate that this is a difficult area, because the Ministry has a duty to secure value for money for its paymasters, the taxpayers, but any speeding up of the process would help defence industry companies. If anything can be done to expedite the awarding of contracts, that would be warmly welcomed by the industry and by the country at large.
Lastly, it is important that everything possible be done to help redundant people to re-skill and get back into work as soon as humanly possible. All the companies in Chelmsford are continuing to do all they can to relocate workers within the GEC group, but that is difficult in today's economic climate. They are also doing all they can to help with counselling and setting up advice units to help these people over an extremely traumatic—in the short term—time in their lives.
It is extremely heartening to see how the Essex training and enterprise council has moved swiftly to respond by trying to help, and by contacting the companies concerned—in this instance, Marconi Radar in particular—to see what it can do to alleviate the problems in the town. I know that everyone is grateful to the TEC for that response, and to the company for considering proposals put to it by the TEC for joint initiatives to tackle the problem.
We must continue to ensure that all possible help is given to re-employ these people and to protect our manufacturing base, which has thrived for so long in Chelmsford. Above all, it is crucial that these men should not be forgotten. No one in Chelmsford can forget their plight because for too long we have had to live with the problems that they are facing. I certainly cannot forget the trauma through which they are going, and I know that my right hon. Friend the Member for Braintree and my hon. Friend the Member for Colchester, South and Maldon cannot forget them either, because their constituents are similarly affected.
1239 It is important that these men appreciate that everyone is on their side, that we are not prepared to forget them, and that we are all prepared to work together for them. We must lobby the Ministry of Defence for contracts, and work with Essex TEC and the companies concerned to put together packages to help with re-skilling. I hope that the Government will do what they can to ensure that the recovery continues at a sustainable pace so as to create demand, especially in non-defence-related industries. When that demand picks up, companies will respond by taking on skilled workers to meet it.
All these factors amount to a package. We must work together to get workers back into manufacturing as quickly as possible, because there is nothing more debilitating or demoralising for people who desperately want to work than to be unable to use their skills owing to what is happening to defence industries and contracts, here and in the rest of the world, because fortunately we now live in a more peaceful environment.
§ The Minister of State for Defence Procurement (Mr. Jonathan Aitken)I congratulate my hon. Friend the Member for Chelmsford (Mr. Burns) not only on his good fortune in winning the ballot and raising this important subject for debate but on the convincing and compassionate arguments that he marshalled on behalf of his constituency.
My hon. Friend's constituency has had a long association with the defence industry, and particularly with GEC-Marconi and its predecessors. I pay tribute to my hon. Friend for the way that he has been so consistently energetic and assiduous in promoting the interests of his constituents, particularly in the defence industrial sector. He made a valuable contribution to the major debate that was held in the House in May on the defence industrial base, and he frequently tables parliamentary questions, writes to me and lobbies me and other Ministers in the Ministry of Defence on behalf of his constituents.
In this context, I should also pay tribute to my right hon. Friend the Member for Braintree (Mr. Newton) and to my hon. Friend the Member for Colchester, South and Maldon (Mr. Whittingdale), who is here tonight. Many of their constituents also work for GEC-Marconi, and they champion the interests of their constituents. The defence industry workers in that part of Essex are fortunate in having three such doughty fighters for their interests in the House.
The backdrop to, and the reason for, tonight's debate, as my hon. Friend the Member for Chelmsford has acknowledged, is the profound recasting of the strategic environment caused by the collapse of the former Soviet Union, and the disappearance of the Warsaw pact. Our recently published defence White Paper, called "Defending the Future", shows in more detail than ever before the way that we have remodelled our forces to take account of those great changes. Immense though the benefits are to our security and economic well-being, those changes are bringing in their wake painful reductions in some parts of the defence industry.
The outcome of the 1992 public expenditure settlement means that, between 1990–91 and 1995–96, the defence budget will reduce by around 12 per cent. in real terms. Sadly, the equipment procurement programme is bound to 1240 diminish in absolute terms, even if not proportionately. However, those reductions start from a high base line, and we shall retain a substantial defence equipment programme. As my hon. Friend was good enough to say, it is certainly not disappearing.
It will still include highly sophisticated and technologically innovative equipment, which will sustain many thousands of jobs in the defence industries, as well as permitting our armed forces to receive the best and most up-to-date equipment. If one adds together our British domestic procurement budget, defence export annual sales, and the opportunities that exist for defence industries in market testing, one gets a total defence cake of well over £13 billion. That shows that there is still plenty for the defence companies to go for, despite the downturn.
My hon. Friend the Member for Chelmsford was most concerned about the recent job losses at GEC-Marconi. I pay tribute to the company for the way that it has made, and is continuing to make, a major contribution to Britain's defence effort, for which we in the Ministry of Defence have been most grateful. I recognise that in recent years, and for a number of reasons, the level of employment in the company in Chelmsford has fallen considerably. I was sorry to learn of the most recent announcement of job losses by GEC-Marconi Radar and Control Systems.
The company employs 1,400 people in Chelmsford on the design and development of radar equipment, primarily for defence applications. The business in Chelmsford is relocating, partly to new premises elsewhere in Chelmsford and partly to another site. The proposed reduction of 300 jobs is in part because a number of jobs needed to run the old site will no longer be required at the new premises, and partly because the company is also reviewing its structure to reduce operating costs and improve its competitive position.
It is of no comfort to those who have lost their jobs that such restructuring is necessary, and indeed vital, if companies are to survive in the new tighter competitive environment. I understand the deep personal distress that those changes cause to individuals and their families. I thought that my hon. Friend was most eloquent on that point, and I can only add my personal sympathy to what he said.
It is right to emphasise that, in the last five years, my Department has placed a large number of contracts with GEC companies in Chelmsford, 20 of which are each worth over £1 million. The total value of contracts placed with GEC companies in Chelmsford over that period is over £100 million.
Among the substantial contracts carried out for my Department in Chelmsford in recent years have been contracts with GEC-Marconi Communications for the supply of satellite communications equipment, and Triffid Army radio link communications equipment; with English Electric Valves for image intensifier tubes; and with GEC-Marconi Radars and Control Systems for tracker radars for the Sea Wolf missile system. These products make an important contribution to our nation's defence effort.
My hon. Friend referred to two projects in particular. The first of these is the programme for the conversion of type 911 tracker radars. We have surplus type 911 trackers as a result of a cancellation of a previous programme. 1241 There is an opportunity to use these to meet the requirement for vertical-launch Sea Wolf on type 23 frigates, but they require some conversion work.
Marconi Radar and Control Systems are already involved in supporting the radars used in several Sea Wolf point defence missile systems. Complex negotiations have now been taking place with Marconi for some time. I can assure my hon. Friend that we are pursuing these vigorously, and hope to be in a position to place the contract by October.
The second programme my hon. Friend asked about is the tactical radar replacement programme for the Royal Air Force. The competition for this requirement, for which GEC-Marconi is one of four contenders, is now in progress. Although the order is a comparatively small one by Ministry of Defence standards, we recognise the importance which both the United Kingdom firms bidding for the work attach to winning it.
I know that my hon. Friend will understand that, until the evaluation of the tenders has been completed, it would be inappropriate for me to discuss in detail the merits of any bid across the Floor of the House, but I can assure him that the eloquent points he made will be taken into account in the final decision, which we hope to be able to announce by the end of next month.
I hope that these indications of contract announcement dates will be helpful to my hon. Friend and to all who work at GEC-Marconi.
My hon. Friend referred to a study published by the European Commission which showed Essex as an area of the Community with the second highest dependency on employment in the defence industries. This study was based on work carried out by the centre for defence economics at the university of York. There is no doubt that a substantial proportion of industrial concerns in the county are defence-related, but I have to say that we are not entirely convinced that the comparisons in that study between regions in different member states have been done on a like-for-like basis.
This is not just an academic point, as the study's assessments of overall defence dependency have been used by the commission as the basis for allocating funds under the KONVER programme, to which my hon. Friend referred tonight, and also in his speech in the industrial base debate in May. The KONVER programme is a matter for which the Department of Trade and Industry is primarily responsible.
As my hon. Friend knows, the Government have some strong reservations about such schemes, because they represent a partial approach to industrial adjustment. We have also taken issue with the basis of allocation of funds between member states. But, having entered these caveats and reservations, the Government intend to take advantage of the scheme in order to help constituencies such as my hon. Friend's. I take on board his point that the criteria need to be changed, and will bring that argument to the attention of my right hon. Friend the Minister of State, Department of Trade and Industry.
I was glad to hear my hon. Friend speak of the success of GEC-Marconi in diversification matters, and in particular its sales to the BBC and to other institutions and 1242 companies in the export field. We are delighted when defence companies diversify into new markets, and it makes good sense for many companies to do so.
But it is important to say yet again that it is not for the Government to direct companies to diversify. Our interest is in seeing a profitable and competitive defence industry. It is for companies to decide how best they can be profitable and competitive—and if that means diversifying, so be it. I am glad to hear that GEC-Marconi has done so well without any intervention or orders from Government.
I know that my hon. Friend shares my lack of enthusiasm for a defence conversion agency—a distaste which I feel on grounds of both principle and practice. I will not here rehearse the familiar arguments why this is really another socialist interventionist scheme dressed up in new clothing. I think that we all agree that the Government should give what useful advice and help they can, without in any way being an interventionist Government with taxpayers' money.
The Department of Trade and Industry's recent publication "Changing Tack" provides step-by-step advice for defence companies wishing to diversify, backed by the expertise of professional management consultants Touche Ross. In that way, we assist and encourage management flair, rather than stifling it with regulations, bureaucracy or ill-targeted subsidies paid for by the taxpayer.
I was grateful to my hon. Friend for pointing out that British defence contracts support British jobs and expertise in some 90 per cent. of cases in which we award contracts. We believe in fair and open competition, but the fact that more than 90 per cent. of our contracts go to British firms shows where our heart lies. We do not wish to neglect the importance of Britain's home-grown defence industries.
Let me say a little about our relations with industry generally. It is important that my Department and the defence industry work together closely. We do not believe that relations are in any way unhappy at present; indeed, I was pleased to note that the defence manufacturers gave a cautious welcome to the announcements in the recent White Paper.
I acknowledge that, two or three years ago, there was a feeling—born of the uncertainty of the time—that, during the period of deliberation on "Options for Change", the Department was not as open with industry as it might have been; but I think that my right hon. and hon. Friends who have held ministerial office experienced difficulties at that time. They had to formulate defence-policy parameters and set the priorities—duties which, possibly, are for Government alone.
Once decisions were made, however, we made strenuous efforts to provide industry with all the information necessary to enable it to make sound commercial judgments. Our aim was, and is, to enable companies to remain competitive and successful in both domestic and overseas defence markets. The GEC group as a whole, and GEC-Marconi in particular, have certainly done that.
We are trying to provide the defence industries with as much knowledge of our requirements as possible. There has always been a significant flow of information from the Ministry of Defence to companies right across the spectrum from top-level committees such as the National Defence Industries Council and the Chief of Defence 1243 Procurement's regular meetings with the trade associations, down to the informal contacts between individual companies and MOD officials. The work that hon. Members such as my hon. Friend can do in strengthening that bridge of information and understanding is considerable.
We are doing all that we can to provide defence companies with more and more information. We shall soon publish a comprehensive list of endorsed staff targets and staff requirements, which we shall update annually. Those documents are the driving force for procurement action on all projects in which we expect to spend at least £5 million on development or £10 million on production. We hope that the publication of that comprehensive list will be helpful to all actual and potential defence contractors, including GEC-Marconi.
The process of managing the defence budget is dynamic. Inevitably, we must make painful adjustments to certain programmes from time to time, because of the changing international strategic situation, to which my hon. Friend referred. We shall continue to fine-tune the 1244 programmes, but I think that industry understands the difficulties created by the changes in the world security environment. Although there are bound to be tensions and problems, I think that on the whole there is an amicable and constructive dialogue between my Department and industry.
I feel that, in general terms, we should welcome the more stable international situation that now exists. Of course there are still some trouble spots in the world, such as the former Yugoslavia; nevertheless, we have been able to shift some of our national resources away from defence. I recognise that that is only a modest comfort to those who work in the defence industry, and I sympathise greatly with the plight of the workers in Chelmsford described so eloquently by my hon. Friend. Sadly, it is a fact of life that there will be fewer MOD orders in the future than in the past; that is why companies such as GEC-Marconi are having to adapt accordingly.
§ Question put and agreed to.
§ Adjourned accordingly at fourteen minutes past Twelve midnight.