Defence Industrial Base

HC Deb 19 May 1993 vol 225 cc297-341

Mr. Deputy Speaker (Mr. Michael Morris)

Madam Speaker has selected the amendment standing in the name of the Prime Minister.

7.15 pm

Dr. David Clark (South Shields)

I beg to move, That this House recognises with gratitude the efforts and skills over the years of all workers in the defence industries who have ensured that the United Kingdom's security has been maintained with the best of equipment and weapons; notes that with its laissez faire approach to the reduction in defence orders, Her Majesty's Government now threatens the long term viability of Britain's defence industry; regrets that the Government is now treating defence workers in a callous and cavalier manner, as has been most recently witnessed in the case of Swan Hunter on Tyneside; and calls upon the Government to ensure an adequate package of measures to attract investment and employment to those areas adversely affected and to establish a Defence Diversification Agency as part of a strategy of harnessing all the available skills for the national manufacturing effort. The Labour party felt that it was necessary to call this debate in time allocated to us, in view of the Government's failure to allow a debate on defence. As the House knows, it has long been a convention that two days each year are allocated to discuss the defence estimates, which permits hon. and right hon. Members to raise a wide variety of issues affecting the defence of Britain. However, the Government have resolutely refused to arrange such a debate, despite repeated requests from Labour Members. One must go back to 1991 to find the previous opportunity for the House to have a general debate on defence.

We all know why the Government have failed to arrange a debate—it is simply that they are in such a mess on defence and dare not face the exposure of their inadequacies in this field. The crisis management approach, which is inevitable once' they abandoned the strategy in favour of expediency, has been widely criticised throughout the defence and security field.

The Labour party has made its position clear. At the last general election, our manifesto said that we would provide whatever resources are needed for effective defence for our country". That is clear—there is no hesitation, no calculation and no equivocation.

Mr. David Sumberg (Bury, South)

How does the hon. Gentleman square that statement with the commitment made at the Labour party conference for £6 billion-worth of cuts and the commitment of the hon. Member for Livingston (Mr. Cook) to reduce expenditure to the western European average? Such policies would decimate the defence industry in the United Kingdom, kill jobs in and around my constituency and be an absolute disaster for the industries which the hon. Gentleman says he represents.

Mr. Clark

I had intended to speak only briefly today, but, in view of the hon. Member's inane intervention, I will not do so. Let me take it clear where the Labour party stands. We will provide whatever resources are needed for the effective defence of our country. I hope that Conservative Members can understand that.

Mr. Rod Richards (Clwyd, North-West)

rose—

Mr. Clark

I will not give way, because it will be an inane comment.

When we speak of "whatever resources", we are conscious that it is not sufficient merely to count the number of our armed forces. One must take into account the resources and equipment available to our troops. Those resources and equipment have been among the best in the world, and have been largely produced in British factories. The skill and commmitment have been absolute. One has only to visit our defence factories to appreciate the pride and dedication of the workers. The House and the nation owe a debt of gratitude to our workers in the defence industries.

With the break-up of the Soviet Union and the disappearance of the Warsaw pact, almost every country in the western world has reduced, or plans to reduce, its defence spending—that is natural—and this Government have been no exception. Even before the round of defence cuts which are currently being planned, Her Majesty's Government have announced cuts of up to 20 per cent. by 1995–96 and a projected further 9 per cent. thereafter.

The Opposition do not quibble with reducing defence spending. We quibble only about how the Government have arrived at their decisions without a defence review. How have they determined to implement the cuts, sweeping aside all moral, social and strategic consequences affecting all those involved in our defence industry?

Since 1990, more than 100,000 workers in defence-related industries have lost their jobs. Men and women who have given years of service have found themselves suddenly dumped on the scrap heap. With their sole reliance on market forces, Her Majesty's Government have not only acted unfairly but put at risk the ability of Britain to supply our own defence needs in the future.

In essence, the Government have taken a laissez-faire approach to the future of our defence industries. Whatever is cheapest in the short run is preferred and damn the consequences. Their strategy towards the defence industry of Britain is little more than industrial Darwinism. Whatever emerges from the free market must be correct and they will worry about tomorrow when the day comes. As a nation, we shall rue the consequences of that policy.

Mr. Richards

Will the hon. Gentleman tell the House and the country which shipyard would have been given the landing platform helicopter contract if he had been Secretary of State for Defence?

Dr. Clark

The hon. Gentleman has asked a fair question. I shall answer the question because it deserves an answer. Given a difference of £70 million in an order of £210 million, there was no choice but to give the order to Barrow and Govan. I hope that that is sufficiently plain and straight for the hon. Gentleman. I shall deal with the point further later.

Mr. David Ashby (Leicestershire, North-West)

Will the hon. Gentleman give way?

Dr. Clark

No. I want to make progress, not deal with some fatuous point.

By their position as monopoly buyer, the Government have weakened the industrial base of Britain. That is extremely dangerous. As Gerald Boxall, chairman of Vickers, recently argued crudely: You can't go to war without an industrial base. John Weston, the managing director of British Aerospace—one of Britain's largest companies—put it more diplomatically when describing the defence industrial base. He rightly claimed that it was part of the essential make-up of the country's defence posture. Both were right in their own way.

Nowhere has the problem been seen more clearly than in the case of Swan Hunter on Tyneside, a shipbuilding company with a long tradition of building fine ships which have met the exacting standards of the Royal Navy. There was no mention of its sterling work in the Falklands conflict, when the men worked night and day to ensure that the ships were prepared for the conflict.

Last week, events occurred at Swan Hunter which no one has been able to explain satisfactorily. On the day that it was announced that the helicopter landing ship was to be built at Govan and Barrow, the Evening Chronicle in Newcastle ran a dramatic story, supplied by the hon. Member for Tynemouth (Mr. Trotter), under the banner headline on the front page "Victory", that the ship was to go to Swan Hunter.

Given the Government's view that the Royal Navy should have fewer than 40 surface ships, the hon. Member for Tynemouth cannot have realised that the Government had decided that Swan Hunter was expendable.

Mr. Peter Atkinson (Hexham)

The hon. Gentleman does my hon. Friend the Member for Tynemouth (Mr. Trotter) a great disservice. I can confirm that, between half-past 1 and half-past 2 on that day, which I spent in the company of my hon. Friend, he did not know the outcome of the Ministry of Defence decision. So to blame him for floating that story is utterly unworthy and unfair. The hon. Gentleman should withdraw the accusation.

Dr. Clark

I agree with the hon. Gentleman's point. He is right. The hon. Member for Tynemouth did not know what the position was. He would not have made any comments to the press along those lines if he had known.

Mr. Neville Trotter (Tynemouth)

It is good of my hon. Friend to explain what happened on that day. He and I had lunch together. I was riot aware of the outcome of the decision on the order. I did not advise the Evening Chronicle in the way that it reported. What the hon. Gentleman said is not true. I appreciate that he said it on the basis of an inaccurate account in a newspaper. The truth is as explained by my hon. Friend the Member for Hexham (Mr. Atkinson).

Dr. Clark

I gave way to the hon. Gentleman because, as I notified him, I mentioned him in my speech. I do not suggest for one moment that he knew the outcome. Of course he did not know. That adds to the mystery of the events surrounding the whole tendering process. That is the point that I want to raise tonight.

In view of the background, several pertinent questions need to be answered about the events surrounding the affair. I see that the hon. Member for Tynemouth agrees with me on that point. Those questions can be answered only by an independent inquiry. I am glad that the Defence Select Committee shares my view, and I am delighted that the National Audit Office is now to investigate.

Mr. Tim Devlin (Stockton, South)

Will the hon. Gentleman give way?

Dr. Clark

I have made it clear that I wish to complete my speech as quickly as possible.

Many questions arise. How is it that two bids were different to the tune of £70 million out of an order of £210 million? That stretches the imagination. Were the two companies bidding for precisely the same ship? I understand from the hon. Member for Tynemouth, through the north-eastern newspapers, that, in a meeting with him, the Controller the Navy, Admiral Sir Kenneth Eaton, confirmed that the companies were bidding for the same ship.

If Swan Hunter goes under, how will that affect the Government's procurement policy? There will be no warship building yards in Britain capable of building anything larger than a frigate, with the possible exception of Vickers Shipbuilding and Engineering Ltd. in Barrow, and that only if massive investment in slipways and cranage was undertaken there.

Mr. Trotter

I noted what the controller said when I asked him about the matter. He said: They were two good designs and either was acceptable to the Navy. He categorically denied that there was anything wrong in the process by which the decision was taken.

Dr. Clark

I am grateful for that intervention. However, to say that either design was acceptable to the Royal Navy is not the same as saying both yards bid for the same type of ship. That is the essence of one of the questions to which we need the answer.

If we have no large warship building capacity, with the possible exception of VSEL, where will our future large naval ships be built? Will they be built in foreign yards? Will they be built in South Korea? Will VSEL be given the monopoly for large ships as well as for submarines? If that is the case, how does the Government's competition policy operate? Furthermore, have the Government no concern about the prospect in strategic terms of not retaining some capacity for large warship building?

Opposition Members believe that we need an answer to such questions. We need an inquiry, not to reopen the bid but to ensure that no mistakes which may or may not have occurred in the tendering procedure are repeated.

Mr. Richards

Will the hon. Gentleman give way?

Mr. Gary Streeter (Plymouth, Sutton)

Will the hon. Gentleman give way?

Dr. Clark

No. I must continue.

There is too much at stake for any mistakes to be repeated. Not only the livelihood of men and women is at stake but the long-term ability of Britain to defend itself.

Mr. Streeter

Will the hon. Gentleman give way?

Dr. Clark

I must make progress. I am sorry, but I must continue.

Until such an inquiry has reported, many will believe that Her Majesty's Government deliberately and callously set out to deceive all those at Swan Hunter, including the hon. Member for Tynemouth, into believing that it was favourite to win the order when clearly, with an overbid of £70 million, it was never a runner. It is difficult to come to any conclusion other than that the Government had it in for Swan Hunter. How otherwise can one explain a local newspaper headline claiming victory? How otherwise can one explain the Prime Minister's being given credit for the order by none other than the hon. Member for Tynemouth (Mr. Trotter)?

Mr. Michael Bates (Langbaurgh)

Will the hon. Member give way?

Dr. Clark

No.

Labour believes that we must have more planning in this respect—flexible and viable planning, but nonetheless with a strategy. Like Her Majesty's Government, we have accepted that the amount we spend on defence in the years to come is likely to be reduced. Thereafter, we depart from the Government's approach.

Mr. Devlin

Will the hon. Gentleman give way?

Dr. Clark

No.

Mr. Devlin

It is a very good point.

Dr. Clark

If it were a very good point, it would be unique for the hon. Gentleman.

The Government must show in a tangible manner that they are prepared to provide financial assistance for areas affected by defence industry closures and rundown. The Tyneside offer, for example, is a mere fleabite, bearing in mind the enormity of the problem involved. In south Tyneside, where about 40 per cent. of the work force of Swan Hunter live, there is already male unemployment, according to the Government's own figures, of more than 28 per cent. That does not take into account the 1,100 miners at Westoe colliery, where work stopped just 10 days ago.

We are talking about male unemployment of more than 33 per cent. in a big borough—not a small town—of 150,000 people. That will be the effect. I realise that Conservative Members are not interested in unemployment, especially in the north-east of England. I am dealing with figures not for wards or for towns but for a large travel-to-work area. [Interruption.] Hon. Members may cackle, but the people of this country will agree that an unemployment rate of one in three is unforgivable and that the Government must do something about it.

Mr. Bates

Will the hon. Gentleman give way?

Dr. Clark

As the hon. Gentleman represents a seat in the north-east, I am sorry to say that I cannot give way.

Even the European Community recognises that former defence industry areas may have a problem. Indeed, its own KONVER fund is available. Can the Government give the House an assurance tonight that Britain will avail itself fully of this programme? Will areas such as Tyneside, which are outside the scheme, be brought within it?

I am trying to get across to Ministers a point that they have not yet taken—that we are talking about a situation in which one in three men are out of work. This is not short-term unemployment, but massive long-term unemployment.

Mr. Bates

The hon. Gentleman seems to be basing his defence policy on the Evening Chronicle. Given Labour's policy, that is a fairly credible base. Nobody doubts for one minute that unemployment is a tragedy. The hon. Gentleman himself has just said to the House that, given the same criteria and the same bids, he would have made the same decision. That being the case, what does he propose?

Dr. Clark

We need answers to a number of questions about the whole process of tendering. I cannot say what I would have done if I had been the Secretary of State for Defence. Quite clearly there is not available to me anything like as much information as is available to the Government. I shall not bore the House. Surely hon. Members are not so stupid as to fail to understand that the Government have tens of thousands of civil servants, including some of the top contract lawyers in the country, helping them to evaluate contracts.

Several hon. Members

rose—

Mr. Frank Cook (Stockton, North)

On a point of order, Mr. Deputy Speaker. Like you, Sir, I am well aware of the fact that a standard defence tactic is the firing of chaff in the event of illumination by enemy fire. Is it in order for Conservative Members to use debating chaff to disrupt the development of a genuine theme by the Opposition spokesman? Will you please enable my hon. Friend to speak without interruption so that we may understand the logic, even if Conservative Members are incapable of understanding it?

Mr. Deputy Speaker (Mr. Michael Morris)

I was in the Royal Air Force, and it seems to me that the Opposition spokesman is a pathfinder. [Interruption.] The hon. Member, having intervened at least once—perhaps twice —should realise that the hon. Gentleman is not giving way to him.

Dr. Clark

If this is the best that Conservative Members can produce, it will not be very difficult to handle. The Government must take seriously the need to aid areas that are suffering from massive unemployment. These problems will not go away. Labour Members believe that the Government should be more pre-emptive.

It is our belief that Britain needs a defence diversification agency—a body that would ensure that companies in the defence field were assisted with defence conversion work and, where appropriate, helped to diversify into other markets, products and technologies. We accept that this is not an easy remit, but it is one that is worth pursuing.

In spite of attempts by the Government to ridicule the idea, other countries are now adopting this approach. This applies to France, Germany and, most recently of all, the United States of America. Even that high apostle of the free market is not so obsessed as are the Government and Conservative MPs with the free market that is prepared to sacrifice its own indigenous defence industry and the skills of its workers for some short-term financial gain, which will probably cost dear in the long run. Congress has allocated billions of dollars for defence diversification and for the use of dual technology. There is no doubt that the Administration in the United States are aware of the problem and of the challenge. Unlike the British Government, they are prepared to face up to the challenge.

Defence diversification is a runner even at the moment. There is defence diversification in this country. Companies are already involved in the process.

Mr. Keith Mans (Wyre)

Will the hon. Gentleman give way?

Dr. Clark

I should like to give way, but I must make some progress.

In Devonport, I saw luxury yachts being built. In Rosyth, I saw London underground trains being refurbished. In Southampton, Vosper Thorneycroft is working on fireproofing techniques for North sea oil platforms. This is admirable. In Weymouth, Ferranti Thompson has adapted its sonar work for seal scaring in Scottish fish farms. Swan Hunter itself has diversified. It was building the new Tyne ferry and various pontoons. In addition, it had an order book of more than £5 million in general engineering. Firms have diversified.

Furthermore, many local authorities and trade unions, unlike the Government, have accepted the challenge of defence diversification. Much work is being done up and down the country. All this is being achieved despite lack of encouragement from the Government—indeed, at times, despite their discouragement. Imagine what could be achieved if there were an enabling hand.

The innovative skills of the defence industry could be harnessed in the civilian field as well as the military field. There are many opportunities to create dual technologies. If we were to pursue this path, the manufacturing decline that we have seen for the past 14 years might well be reversed. The Government owe it to the defence workers and the country at large to ensure that that happens.

7.40 pm

The Minister of State for Defence Procurement (Mr. Jonathan Aitken)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'recognises with gratitude the efforts and skills over the years of all workers in the defence industries who have ensured that the United Kingdom's security has been maintained with the best of equipment and weapons; notes that the policy of competition for defence orders adopted by Her Majesty's Government has resulted in an efficient United Kingdom defence industry with world-class export performance; condemns the 25 per cent. defence cuts demanded by the Labour Party Conference which would cripple Britain's armed forces and her defence industry; rejects the idea of a Defence Diversification Agency to second-guess business decisions that should more properly be taken by companies; but welcomes the assistance provided by Her Majesty's Government to help regions to adjust more effectively to major industrial change by creating opportunities for new industries, as exemplified by the wide-ranging package of measures announced last week for Tyneside.'. The House has just listened to a wildly intemperate and inaccurate speech. As I listened to the feeble attempt of the hon. Member for South Shields (Dr. Clark) to become a rabble rouser for the evening, the words of a famous Labour party icon came into my head. They were used by the great and late Nye Bevan, who once opened a debate in the House by saying that he welcomed the opportunity to prick the bloated bladder of lies with a poniard of truth. That is exactly what I am going to do this evening.

I shall not stray out of order and accuse the hon. Gentleman of outright mendacity, but I have seldom heard a more unconvincing mish-mash of half truths, misrepresentations and fantasies from the Evening Chronicle—all washed down by heady draughts of conspiracy theory. I am glad to take on the hon. Gentleman point by point and answer the questions that he has posed.

Tonight's debate is taking place against a background of the sad receivership of Swan Hunter. The feelings of sadness run deep on both sides of the House. Swan Hunter is a proud name and a great yard which has built warships for the Royal Navy to the highest standards for many years. For that company to go into receivership with a potentially large loss of jobs is a human and commercial tragedy which we all deeply regret.

However, according to the words of the Opposition's motion and the flamboyant language of the hon. Member for South Shields, the Opposition seem to want to express not regret, but recrimination. In the motion they accuse us of behaving in a "callous and cavalier" manner towards Swan Hunter. That is a false and baseless charge. I am glad to have a chance to answer it, and the fundamental question: could the Government have done anything to avoid Swan Hunter going into receivership? I am sorry to have to say that the only realistic and responsible answer to that question is no.

We think that the Government acted not only scrupulously fairly, but also as positively and helpfully as they could do in relation to Swan Hunter's helicopter carrier bid. Sadly, the plain truth of the matter is that Swan Hunter's deep-seated financial problems were far too great, and its bid for the LPH was far too high for the Government to be able to take any practical steps that might have helped the company to avoid receivership.

Mr. Frank Cook

What is the Government's intention with regard to the three frigates awaiting completion in the Swan Hunter yard?

Mr. Aitken

Those matters are being discussed by my Department and the receiver, who has already been good enough to describe our attitude to the problem as positive and constructive. We hope that it may be possible to finish the ships in the Swan Hunter yard, but that is a matter for continued negotiation and discussions between the receiver and us.

When bids are more than £50 million apart and the lower bid fully meets the Navy's requirement, no responsible Minister, in the interests of being fair to the taxpayer or the competitive bids, would argue in favour of accepting the higher hid. He would have to be certified to do so. I am glad that the one theme of commonsense that emerged from the hon. Gentleman's speech was that he seemed to recognise that, although it was not recognised by some of his Front Bench colleagues in yesterday's debate.

I recognise that what I have just said is unwelcome news to some hon. Members and some outside commentators who have spoken out so vociferously in understandable sympathy with Swan Hunter in the past few days. But defeat in a major commercial bid competition is often the father of unconvincing excuses and sometimes, as we have seen tonight, even the mother of ridiculous conspiracy theories. I am glad to have this chance to answer, point by point, some of the allegations that have been floated, particularly those made in yesterday's debate by the hon. Member for Newcastle on Tyne, East (Mr. Brown). He made the totally unconvincing charge that Swan Hunter's failure to win the LPH competition was the deliberate fault of the Ministry of Defence.

As my right hon. Friend the Prime Minister made clear last week, the Government were sufficiently concerned earlier this year about the deteriorating financial situation at Swan Hunter to bring forward by several months the LPH bids and their decision on them. We felt that by giving Swan Hunter a fair chance to win the competition we were offering the yard and its employees their best and perhaps only immediate chance to secure their future.

I think that that was well recognised at Swan Hunter. When I visited the yard on 3 March I found that most people with whom I talked, especially the union leaders, recognised that the company had to put in a keenly priced bid to win the contract against what they must have known would be an equally keenly priced bid from their competitor, VSEL, which also had profound employment and other worries.

When the two bids came in, we were surprised, just as others have subsequently been surprised, by the size of the difference between them. It was, as I have already said, a difference in excess of £50 million. However, we were not surprised that VSEL's bid was so low, but that Swan Hunter's bid was so high. The VSEL bid did not surprise us because it came in at about the price which the internal estimates of our experts had suggested would be a fair and proper price for such a ship.

The hon. Member for Newcastle upon Tyne, East made a number of fanciful claims in the House yesterday which deserve a rebuttal. First, he suggested that we deliberately changed the specifications to increase Swan Hunter's costs. Let me make it clear that both yards tendered a ship to meet exactly the same specification.

Mr. Stephen Byers (Wallsend)

The Minister will be aware that one of the concerns is that the yards may have been tendering for two different sorts of ship. Will he comment on the statement made this afternoon by David Smith, the commercial director of Kvaerner Govan, that the company tendered for a commercial vessel, whereas Swan Hunter tendered for a naval vessel?

Mr. Aitken

I shall comment not on the statement as I have not read it, but on the hon. Gentleman's general claim, which is not new. The charge has been made several times in the feverish atmosphere of the past few days. However, I shall first respond to the issues raised by the hon. Member for Newcastle upon Tyne, East.

Some changes were included in the specification issued with the invitation to submit best and final offers. Those changes were, in general, relaxations of the specification. Swan Hunter made some material additions to its bid to meet that relaxed specification, but none would begin to account for the extraordinary gap in price between the two final bids.

There have been claims—such as those just made by the hon. Member for Wallsend (Mr. Byers)—that Swan Hunter bid for a warship and VSEL bid for a merchant vessel or commercial ship. As I have said, our requirements and specifications were made crystal clear to both companies. We operated on an entirely level playing field. We did not, as some have claimed, ask one company to bid for one sort of ship and the other company to bid for a quite different sort of ship. Although they based their bids on different designs of their choosing, the similarity between the two proposals was remarkable.

The tonnage of both bids was virtually the same, the length of the two designs was the same to within a few metres, and the width or beam of the ships was almost identical. Both companies bid in the knowledge that we required a merchant shipping quality hull rather than a warship quality hull as we have always seen the LPH as a vessel that is likely to stand off from the heat of the land or sea battle protected by a frigate or destroyer escort.

The hon. Member for Newcastle upon Tyne, East claimed that VSEL unfairly subsidised its bid. Our shipbuilding experts in the Ministry of Defence were not born yesterday. They were always on the lookout for what is called "buying the contract" by VSEL by cross-subsidies or by unfair underpricing. But we found no evidence of such practices in the VSEL bid, which I emphasise came in at the ballpark level of price which we expected for such a vessel.

Mr. John Wilkinson (Ruislip-Northwood)

My hon. Friend the Minister is being extremely helpful to the House. Will he give the figures for the bids tendered by Swan Hunter and VSEL/Kvaerner Govan in the first round, and in the second—the best and final—round?

Mr. Aitken

For good reason, it is the practice of the Ministry of Defence—at the request of all competitors—not to give detailed, specific figures. We are prepared to supply the figures to the National Audit Office, but for reasons of commercial confidentiality—

Dr. John Reid (Motherwell, North)

Not good enough.

Mr. Aitken

We have clearly explained the gap between the two bids, and we have not been criticised for giving the broad figure.

Dr. David Clark

The Minister has tried as best he can, given the difficulties with commercial confidentiality, to explain the matter to us. I must ask him, however, whether the difference in the initial bids was as great as he suggests. Was there a considerable difference between the initial bids? When was the final bid actually received?

Mr. Aitken

I cannot give the hon. Gentleman the precise date, because it was only a few days—[Interruption.] My colleague will give the answer in his reply to the debate, because I do not have the precise date in my head. There was certainly a gap between the original bids and the second bids, but the best and final offers were the ones that counted.

Dr. Clark

The Minister has misunderstood my genuine inquiry. Was there a difference between the bids of the two companies at the initial stage?

Mr. Aitken

There was certainly a difference, which did widen. We do not give the figures, for reasons of commercial confidentiality. The detailed figures that the hon. Gentleman requests should not be given across the Floor of the House, but they will be given, in terms of commercial confidentiality, to the NAO and, if appropriate, to the Select Committee.

Finally, and most conspiratorially of all, the hon. Member for Newcastle upon Tyne, East, echoed by the hon. Member for South Shields, told us that my Department had been plotting the downfall of Swan Hunter for some months. That is an absurd accusation, not borne out by the facts that I have given the House.

To return to reality: we evaluated the bids thoroughly against our usual technical and value-for-money criteria. We examined them for omissions or signs that the bidders had under-estimated the complexity of the task of the risks involved. We took our findings on these points into account when reaching our final decision. It was the VSEL bid that fully met our requirements, at the price that we had expected to pay for such a ship, and it was more than £50 million lower than the Swan Hunter bid. In those circumstances, we had no choice but to accept the lower bid.

After saying so much about Swan Hunter, it is only fair to congratulate VSEL on putting in a first-class, highly competitive bid.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

As the Minister has referred directly to me, I am grateful to him for giving way. I understand that, following my speech yesterday, he is under a duty to attack me—but much of what he has said merely confirms what I said then. Will he tell the House whether the AOR1 bid was carefully checked by the Department for cross-subsidy, and whether there was such a large difference between the initial bids of VSEL and Swan Hunter that the Government felt that they had to place the order with the former and could not proceed with Swan Hunter?

Mr. Aitken

I have never heard such a wriggling intervention. I have just blown up every one of the charges that the hon. Gentleman launched last night, and now he says that my speech has confirmed what he said. The AOR1 was a politically directed bid to Harland and Wolff. That did not turn out successfully; it is not comparable with a competition that we evaluated purely on technical and value for money grounds.

My last point on the subject of Swan Hunter is that the Department welcomes the initiative taken by the Select Committee to ask the National Audit Office to review our bid evaluation and selection process. We have nothing to hide in this matter. The bids were carefully evaluated with the integrity and professionalism that we have long come to expect from my Department's sea systems controllerate.

I am sorry that the hon. Member for Newcastle upon Tyne, East appears to be repeating the grave slur that the books were cooked or the figures rigged in order to tilt the bid away from Swan Hunter. I hope that he will, in a calmer moment, think of withdrawing the allegation that he made last night. I do not believe that he possesses a shred of evidence to support it.

Mr. Nicholas Brown

I will willingly acquit the Government, the Prime Minister and the Minister of the charge of deliberately closing Swan Hunter as a warship building yard if the Minister will now say that the Ministry of Defence is willing to put further warship work into Tyneside.

Mr. Aitken

The hon. Gentleman is turning himself into a stunt man, which is not like him. I understand his frustrations as a constituency Member—frustrations felt just as keenly by other constituency members. The future of Swan Hunter must depend on its future ownership, about which I can say nothing tonight.

My point is that we welcome the involvement of the National Audit Office. We are glad to supply the factual evidence—it appears of little interest to Labour Front-Bench spokesmen—to the Select Committee and the NAO. That is not a precedent, so it is no use the hon. Member for South Shields trying to claim credit for a breakthrough.

In the past, we have routinely given information on our handling of major procurement projects to the NAO and the Select Committee in commercial confidence, if they have asked for the information. We are perfectly happy to accept this extra dimension of oversight, and we are confident that our judgment will be seen to be right, in the interests of the taxpayer and in the interests of upholding fair play as between competitive bidders.

The hon. Member for South Shields launched an attack that went much wider than just our handling of Swan Hunter. His debate was originally entitled "The destruction of Britain's defence industrial base". Evidently there were some nervous second thoughts and cooler heads prevailed, because the words "destruction or have been lifted from the title. The thinking behind the motion, however, remains the same.

Judging by the motion and by the hon. Gentleman's dyspeptic undertaker's manner of delivery tonight one might be forgiven for thinking that Britain's defence industry was tottering towards the grave. It is not even a case of Reports of my death have been greatly exaggerated", as Mark Twain once said: Britain's defence industrial base, as I shall go on to point out, is thriving in the circumstances.

Mr. Phil Gallie (Ayr)

The hon. Member for South Shields (Dr. Clark) referred to diversification in the defence industry, and to the Rosyth dockyard and the overhaul of underground carriages. Was it not the Government's far-sighted vision, when they privatised the dockyard, which gave it that ability? Did not Opposition Members oppose that privatisation?

Mr. Aitken

I thank my hon. Friend for that good point. The consortium that runs the dockyard has been able to diversify splendidly without any help from an expensive Government quango of the sort that the hon. Member for South Shields wants to set up. Business makes these decisions better than advisers in the Government trying to second-guess commercial affairs.

We had better define what Britain's industrial base is. We believe that it includes about 440 United Kingdom-based companies which last year won contracts from the Department worth £1 million or more each. The defence industrial base employs, directly or indirectly, about 500,000 people. It won domestic orders from us worth £8.8 billion, and it won export orders for overseas contracts worth £5.1 billion.

Within an industry of this size and complexity there are bound to be winners and losers, but even in the difficult post-cold war climate, in which defence budgets are diminishing—our own by 10 per cent. over the next three years—a great many British defence companies are not merely surviving but thriving. One reason for that is the boom in exports of defence equipment. Britain's defence exports are a tremendous success story. For the year ended 31 December 1992 Britain achieved defence export orders worth more than £5.1 billion, or 20 per cent. of the world market. Both are record figures. This year we will do even better.

Mr. Ian Davidson (Glasgow, Govan)

Would the Minister clarify whether there will be defence cuts of 10 per cent. in the next three years?

Mr. Aitken

I said that the defence budget planned a reduction of 10 per cent. over the next three years—

Dr. Reid

So it will decline by 30 per cent. in the next nine years.

Mr. Aitken

More statistical juggling by the hon. Gentleman. We do not employ Labour's voodoo economics in our party. I know that Opposition Members cannot stand hearing good news, but that is what I am trying to give them.

I was saying that our record-breaking defence exports are no flash in the pan. They are the result of a lot of hard work by British companies and by the Defence Export Services Organisation, and they are greatly to the credit of our competitive procurement approach. We can say proudly that defence exports are rising, have risen and will continue to rise. In 1982, they were worth £1.7 billion, but they are now three times higher at £5.1 billion and we confidently predict another record-breaking year in 1994 and a world market share of even more than 20 per cent.

It is not only our exports that support the defence industry. Domestic procurement is a vital factor, and although it is undeniable that the defence equipment budget is declining in real terms, we remain British industry's biggest single customer.

I am lucky enough to be able to travel all over the country to Britain's defence companies and I enjoy good dialogue with many of them. Since my surprising elevation to the Front Bench last year, I have made about 30 industrial visits to companies and have had more than 50 meetings with company representatives. I simply do not recognise the pessimistic portrait of the defence industrial base painted by the Opposition.

I shall come in a moment to the issue of jobs and diversification, but I urge the House not to make the mistake of believing that the outlook for our defence industry is one of gloom and doom. Many of our defence companies are continuing to do well. They are maintaining their profitability and turnover, winning new business and reshaping their activities to take advantage of their market strengths.

Mr. Ian Bruce (South Dorset)

Does my hon. Friend agree that one of the problems faced by the shipbuilding industry, especially in relation to warships, is that for some reason it has not sold a single new large frigate to any other nation? If shipbuilding followed the example of the rest of the defence industry, all these jobs would not be lost on Tyneside.

Mr. Aitken

I am afraid that my hon. Friend is inaccurate. He is not even close, because we have some successful warship export orders. We have been listening to a litany of woe about shipbuilding, so I shall give some examples of successful companies. Vospers of Southampton has a record order book of £700 million, which has doubled in the past 12 months, and 95 per cent. of that is for export. Vosper employs 2,000 people and plans to recruit another 200 for its present order book. Although it remains a 90 per cent. defence company, it is broadening the base of its business into new markets without any help from Government quangos, such as the diversification agency suggested by the Opposition.

There is plenty of good news in the aerospace sector. The Government's resolute support for the important European fighter aircraft has given work on the development phase to some 300 United Kingdom-based companies. I was not surprised by the big cheer and the warm reception that greeted my right hon. Friend the Prime Minister when he visited the aerospace workers of Lancashire at British Aerospace's Warton factory last month, given all that he has done for the EFA and Tornado exports. [Interruption.] In the light of the Opposition speeches, one would not think that there was all-party support for the defence industrial base. The party workers may cheer the Prime Minister, but the Opposition spokesman did his best to talk Britain's industry down.

There is also good news for land systems. Only last Thursday I visited the modern and highly efficient production line of one of our major manufacturing companies, GKN Defence at Telford, which makes the world beating Warrior armoured personnel carrier that has served our troops so well in Bosnia. I certainly did not find my GKN hosts wreathed in doom and gloom, but I learned an instructive lesson on jobs.

I said to the engineers working on the production line, "If you win, as I think you will, the £1 billion-plus Kuwait order for Warrior, which we are now negotiating Government to Government, will you take on much more labour?" In effect, the answer was, "Well, perhaps there will be a few more jobs, but not many." I was surprised by that answer but I soon learned how GKN, like so many of our defence companies, is steadily becoming tauter, leaner and more productive, partly at least by engineering labour out of the system through high-tech advances.

Mr. Derek Conway (Shrewsbury and Atcham)

My hon. Friend's visit to Shropshire to the GKN plant was greatly welcomed. As he knows, the engine for the Warrior is built in Shrewsbury by Perkins. The Warrior is not only an excellent vehicle but has an excellent engine. On behalf of Shropshire, I thank my hon. Friend not only for his highly successful visit, which was well covered, but for his efforts to help us to sell Warrior. It is a superb vehicle made by a good work force who deeply appreciate the efforts that he and my hon. Friend the Minister for Trade made to keep jobs and businesses in Shropshire.

Mr. Aitken

I thank my hon. Friend for his gracious intervention. I shall repay the compliment by saying that the people in the factory there think that he is a superb parliamentary advocate for their cause, which he is.

Time and again I was shown new equipment which, sadly in human terms, mean that the human element on a factory floor is often diminished. A computer-guided friction welder means, sadly, that fewer human welders are necessary.

Dr. David Clark

We accept that.

Mr. Aitken

I am not sure whether Labour's Front-Bench spokesmen have accepted that, but I am glad to hear it.

Visiting a modern defence company is more like visiting the frontiers of new technology. My hon. Friend the Member for Shoreham (Mr. Stephen) is in his place. Earlier this month I visited his constituency and saw three of our smaller defence companies which are all at the high-tech end of the business; companies such as Link-Miles, Ricardo Engineers and ECC Simulation, and they are all engaged on high-tech work in computer software.

Mr. Michael Stephen (Shoreham)

My hon. Friend's visit to my constituency was greatly appreciated, and I hope that he found it valuable. I should like to be assured on three matters. First, the costs of bidding for—

Madam Deputy Speaker (Dame Janet Fookes)

Order. The hon. Gentleman seems to be about to make a speech.

Mr. Stephen

Could the Minister give me an assurance on one matter? I may have an opportunity to speak later in the debate. Will he assure me that the Government will do all that they can to reduce the cost of bidding for defence contracts, because those costs are becoming an almost impossible burden for medium-sized companies?

Mr. Aitken

Yes, I can give my hon. Friend that assurance. We have embarked on a major contracts review to simplify the procedures, and we have small and medium-sized companies very much in mind.

The Opposition spoke about a defence diversification agency. There is no serious merit in that wonderful wheeze. They say that the Americans do it, but they should look at some of the reactions of the Administration to the initiative that has been lodged. For example, The Wall Street Journal had a full-page article—[Interruption.] It is better than—

Madam Deputy Speaker

Order. I hope that the Minister and the Opposition Front-Bench spokesmen will not engage in semi-private conversations. We should all like to hear what is being said.

Mr. Aitken

I am doing my best to be publicly heard.

There has been criticism of the notion of a magical new formula. I should like to quote no less a figure than the United States Deputy Secretary of Defence, Mr. Bill Perry, who described the record of industrial defence diversification as: unblemished by a single success. The Opposition idea of introducing such unsuccessful projects to our economy is a misguided return to the old days of the national enterprise board.

Mr. James Hill (Southampton, Test)

The Minister mentioned the firm of Vosper. On Monday, not only did the President of the Board of Trade visit Vosper, but the Lord Lieutenant of Hampshire gave the firm the Queen's award for exports. That disproves the assertion that some of our yards are not exporting. A company with a record like that should be supported and in the not too distant future it will look towards the Government.

Mr. Aitken

The diet of good news is too much for the Opposition.

Mr. Simon Burns (Chelmsford)

Does my hon. Friend agree that my constituents who work for English Electric Valve would be heartened if the Opposition sought ways to help the Government to persuade the Americans to drop their protectionist policy which prevents image intensifiers being sold to the American Army? That would be better than raising hypothetical cases about a diversification agency in America that does not seem to work properly and, I suspect, never will.

Mr. Aitken

My hon. Friend is right to make the point that, apart from the defence diversification wheeze, we had not a single constructive new idea from the Opposition, only one long whinge.

The debate has marked a new milestone in the Opposition's slide into opportunistic political humbug. The hon. Member for South Shields—CND, retired—represents a party which, let us remember, has voted four years in a row at its annual conference for a 25 per cent. or a £6 billion cut in Britain's defence spending. Now he suddenly proclaims that. Britain's defence companies need more orders.

Mr. Davidson

Will the Minister give way?

Mr. Aitken

No, no more interventions.

What on earth was the flash of light that brought about that conversion? The cause of the U-turn, transforming the hon. Gentleman and a few of his hon. Friends who agree with him into the new military tendency, a party within a party that now opposes reductions in defence spending and proposes extra orders to create employment in defence companies, was that the Government placed a large defence order for a helicopter carrier, fairly and honourably won by a wide margin by VSEL.

In using an Opposition Supply day in this way, the hon. Gentleman has caused some splits and ructions in his party. Perhaps that is why he had to change the title of the debate. But it would be interesting to know where will be the dogs that will not bark tonight from the Opposition Benches. Where will be the voices of Scotland, Clydeside, Barrow and all the other constituencies in which jobs will be created by the LPH order? I do not think that we shall hear them joining the preposterous cry of foul play on the basis of no evidence.

Mr. John Hutton (Barrow and Furness)

Many of us hope to contribute to the debate, but because the Minister has been on his feet for so long, many of us will not have the chance to do so.

Mr. Aitken

The hon. Gentleman has not been backward in speaking in defence debates. During his recent Adjournment debate he talked of the terrible suicide rate in Barrow and the tranquillisers that were needed, all because orders were desperately needed. Now that the region has an order, it might be gracious enough to say what a successful job the Government are doing.

Mr. Davidson

Will the Minister give way?

Mr. Aitken

No, no more interventions.

I do not believe that in the Labour heartlands people will join in the preposterous cries of foul play that we have heard from the Opposition. They will not believe in the destruction of Britain's industrial base when taxpayers' resources are being so visibly directed to this sector of Britain's manufacturing industry, not just with the LPH order, but with the EFA project, the Challenger project and many other defence projects that I could list.

Not everyone likes the implications of the Opposition motion. I read with great amusement in The Guardian last Saturday an interview by Mr. Andrew Rawnsley with that old Nestor of Labour Secretaries of State for Defence, Lord Healey. On the Opposition's defence policies he said: We have become very timid. We tag along, we attack every proposal for cutting defence spending for example. Sometimes we attack the Tories for cutting when it is clearly absolutely essential. This for me is one of the tragic legacies of Bennery. There we have it—Bennery, Clarkery, CND current, CND retired. As Shakespeare said: there's small choice in rotten apples. The rotten apples have given us a rotten motion. It takes no account of the good strong trees that are growing sturdily in Britain's defence industrial base. It takes no account of our £8 billion a year spending on Britain's defence companies. It takes no account of our £1.2 billion market testing programme which offers big new commercial opportunities to Britain's defence companies. It takes no account of our record-breaking export figure of which I have spoken.

No, Britain's defence industrial base is standing up well in the post-cold war climate. We can be proud of it. We can be proud of it's achievements. We can be proud of the Government's support for it. The Opposition have chosen their weapon for this parliamentary duel. They have chosen a boomerang and it will rebound against them. I urge the House to reject this absurd motion.

8.13 pm

Mr. David Young (Bolton, South-East)

Listening to the spate of self-congratulations coming from the Conservative Benches, one might have thought that we were approaching a general election rather than just having had one. All hon. Members were glad to see the thawing of the cold war. But as the threat of that cold war diminished, other strategies were called for, strategies on forces and on the military supplies to those forces. That is where the Government have been lacking. If my hon. Friend the Member for South Shields (Dr. Clark) seemed like an undertaker, it may have been because he was burying the Government's pretence to have strategies to deal with the new circumstances that come before us now.

Between June 1990 and May 1993, about 55,000 workers in defence industries lost their jobs. A British Aerospace factory near my constituency has, during the past few years, had its work force halved. It is obvious, and it is said throughout the north-west, that once a highly skilled defence engineer is sacked, he seldom reappears in engineering. I should have thought that, given the Government's commitment to the manufacturing industry and the fact that between 1979 and 1993 five jobs in the manufacturing industry in the north-west were reduced to two, there is a need for all the highly trained skills that we have dispensed with and are dispensing with in the former defence industries to transfer to manufacturing.

Other priorities have appeared. When the cold war thawed, the United Nations demands became greater. Demands were created by nationalism in Yugoslavia. There were other United Nations involvements in Cyprus, Angola, Somalia and Bosnia. British troops may not be involved in all those cases, but it is obvious that the United Nations will become more and more involved and more and more troops will be needed. Britain will more and more be called on to provide those troops, not only over a few months, but over many years.

The Government do not appear to have a long-term strategy for that changed situation. It is a difficult problem and it is one to which we must now bend our minds. I listened with interest when I met the British ambassador to the United Nations recently and my feelings are confirmed by his experience, which shows that we must start planning for a situation in which British forces are frequently used as part of a world peace-keeping force.

Military strategy also demands an industrial strategy. The trade unions, which the Government often attack, made clear the position. They said that we require a coherent total approach which first defines defence requirements and secondly ensures that forces can count on adequate manufacturing capacity in Britain. That does not mean that we can manufacture everything that our forces require, but it means that, when we have a tried product, we should look after it.

For example, the British Government failed to intervene positively in Leyland DAF in the way in which the Belgian Government did. A company in my constituency, Edbros Engineering, supplies the bodies for the Leyland DAF trucks which are used by the British Army—the tried four-by-four trucks that are in use in Bosnia. I am saddened to see such a national resource of a tried piece of equipment being thrown into jeopardy because the Government are unwilling, through party dogma, to support the companies that produce that equipment.

I am not asking for subsidies, but I am asking for positive financial help to allow those companies to continue. [Interruption.] While Conservative Members may scorn, other Governments and our European partners do not hesitate to give such assistance. Perhaps that is why they have a manufacturing industry while ours is in decline—because our Government will not put the national interest first. Try telling the French, when their industries and jobs are involved, that it is not wise for their Government to intervene. If the Government had intervened a little more, there would he fewer people in the dole queues of Britain today.

Mr. Richard Spring (Bury St. Edmunds)

About 100,000 people are employed in defence exports. Can the hon. Gentleman speculate how many jobs would be lost if Labour's policy of further restricting defence exports was introduced?

Mr. Young

I will not hazard a reply, but had we been a little more selective after Iraq, we would not have found ourselves in the position that we did.

I have one constant principle, which is not a Labour party political principle, but comes from having served in the British forces. Nothing is more disheartening to the sailor, soldier or airman than seeing comrades slaughtered by home-produced equipment. If we are cautious about exporting arms, I would have thought that recent history justified that caution.

We need defence and defence forces and Labour has said that it will never leave this country undefended. We have a duty to our service men and women to ensure that they are adequately backed by the equipment that they need. Equally, if particular industries and special skills become redundant—and even with British Aerospace's success with the Eurofighter, it accepts that thousands will still have to be dismissed—there is a duty on the Government to ensure that the skilled work force are retrained and redeployed in manufacturing industry, which we need in the peacetime battle for our economy.

I am not against the concept of competition, but with VSEL and Swan Hunter, Government principles of competition—if "principles" is the right word in that context—have been taken to the extent that Britain now has a monopoly supplier of warships. A monopoly sits ill with the concept of competition.

I argue for a new strategy for the future role of the British forces in the new context in which we find ourselves, and a new industrial strategy for the supply of defence equipment to those forces. It is to be hoped that equipment will come from our own industries. If we need to collaborate with our friends in NATO, we should examine joint products in which British manufacturers could be involved.

When the skills of the British defence industry workers must be dispensed with, there should be a strategy of retraining and redeployment so that those skills can be adequately used in this country's manufacturing industries, which are the economic lifeblood of the nation.

8.24 pm

Mr. Simon Burns (Chelmsford)

I hope that the House will forgive me if I make an unashamedly constituency speech, because Chelmsford is greatly reliant on defence industries. I am delighted to see my right hon. Friend the Leader of the House in his place, because he represents an adjoining constituency and many of his constituents work in the four main companies in Chelmsford that meet many of our armed services' defence requirements.

Chelmsford has traditionally been heavily reliant on defence jobs because it is the home of the Marconi companies—Marconi Communications, Marconi Radar, English Electric Valve Company and Marconi Research. In the past 12 months, we have paid a heavy price in redundancies at three of those companies because of changing world patterns.

Despite jibes made earlier in the debate, nothing is more demoralising or debilitating than people who desperately want to work being out of work. Let no one make the mistake of thinking that the vast majority of registered unemployed are scroungers. They are not— they are desperately seeking to return to work and to use their skills. That is particularly true of those from the defence industries, who are a highly skilled, highly motivated work force who produce defence equipment, as well as communications equipment, for not only this country but others.

Unfortunately, as in other parts of the country and throughout the world, Chelmsford's defence companies have paid a heavy price for two reasons. The first is the ending of the cold war, the dismantling of the Berlin wall and the peace dividend. All nations have been compelled substantially to rethink established defence views and the future of their defence industries. The dramatic ending of the cold war came as a surprise, as did the crumbling of the nations in the eastern block.

Secondly, the worldwide recession has not only meant that United Kingdom companies have been fighting a continuing battle to be competitive, but it has had a knock-on effect on other countries, which have also cut their defence requirements—and because the United Kingdom has such an excellent defence exports record, it has been affected. I am delighted that British industry has responded to that challenge and continues to fight throughout the world for orders for its first-class military products.

It has not escaped the attention of companies in my constituency and in others that there is a need to diversify, so that they have a better balance between military and non-military orders. There has been diversification in companies such as Marconi Communications for several years—even before the ending of the cold war. In the area of civil communications, Marconi Communications supplies high-power and low-power radio and television transmitters to the BBC, IBA and clients worldwide. It sells space communications equipment to British Telecom and Mercury and marine and other equipment that can be used in civil applications but also adapted for the military.

Marconi Communications also sells military communications equipment, such as the Scimitar backpack —although that business is declining because of the situation in this country and worldwide. The company also helps to equip the Royal Navy, the United States navy, Holland and the far east with communications products. There again, the market has contracted because of the changes in our defence requirements.

In anticipation of changes and to break down reliance upon military equipment, a few years ago Marconi Communications began to invest heavily in developing new non-military products—for instance, special vehicle radios for the emergency services: the police, the fire service and the ambulance service—in the use of the old VHF television frequencies for equipment, thus giving large transport organisations direct contact with vehicles on the move, and in special projects, including radio distress signalling for fire brigades, portable space equipment and public telecommunications.

It is slightly odd that the hon. Member for South Shields (Dr. Clark) made no mention of the fact that it was a Labour conference two years ago that supported and voted for a policy that would cut defence spending by £6 billion. If implemented, that policy would mean far more job losses in companies similar to those in my constituency.

If my memory serves me aright, the policy of the Liberal Democrats is to cut defence spending by 50 per cent. over 10 years. That would not bring much comfort to my constituents, certainly to those who work for companies such as Marconi. In my constituency, the Marconi Radar company supplies defence equipment to the Royal Navy. It has had an extremely tough time, but it, too, is seeking to diversify to make up the shortfall on the military side of its business.

English Electric Valve has gone through a difficult time. In February and March last year, English Electric Valve, which produces the third generation image intensifiers—a first-class world product—was saved from having to make substantial redundancies by an order that it won from the Ministry of Defence. My right hon. Friend the Leader of the House, the Member for Braintree (Mr. Newton) and I, as constituency Members of Parliament, brought to the attention of the Ministry of Defence the fine qualities of that product. I thank the Ministry of Defence for placing that contract with English Electric Valve.

What is particularly galling is that we do not necessarily fight on a level playing field with overseas nations. Through an Act of Congress, the United States Department of Defence forbids companies such as English Electric Valve from tendering to supply the United States Army with image intensifiers. That is wrong.

I raised the matter two years ago with the then Minister of State for Defence Procurement. Through the offices of the British embassy, he kindly raised the matter with and vigorously lobbied the US Government and the Department of Defence on the unfairness of the unlevel playing field. Unfortunately, the Americans refused to budge and change their policy. It is highly protectionist and it is wrong. If there is a first-class product, it should be able to compete worldwide, particularly if the Americans are to compete in our markets.

I pay tribute to the Minister of State for Defence Procurement for the fact that over 90 per cent. of the defence requirements of this country are placed with British companies, which saves British jobs and provides the British armed forces with first-rate equipment. That is right and it must continue. It is important that we should look after our own, provided that the product is cost competitive and that its quality is right.

At a time such as this, when companies are having to make a difficult transition, it is important that the Ministry of Defence should place, whenever it is feasible and possible to do so, its orders or its upgradings or maintenance contracts as quickly as is humanly possible with companies so as to encourage them to continue to provide those services. I am sure that the Minister is more than aware of the need to do so and is seeking ways to ensure that that is done.

It is important for us not to get sidetracked by the tantalising but unrealistic suggestion that an agency such as a diversification agency is the panacea for all problems. Industry and commerce, which have their own entrepreneurial flair and leadership, do not want and do not need politicians to interfere and tell them how to run their businesses and how to win orders. It is important that business men, management and the work force should work together, invest heavily in research and development and come up with ideas for products that are viable and relevant to the needs of the market in both the military and non-military spheres. In that way, and by being highly competitive, they will win the orders that will allow the technological trail blazing and frontier busting to continue.

Furthermore, it should not be forgotten in a debate of this nature that the British Government provide help both to defence-related companies and to others that have nothing to do with the defence industry. For example, the Budget provided for export credit guarantees to be extended. That will benefit companies. The Government also support business men when they go overseas and try to get people to buy British.

Mr. Iain Duncan Smith (Chingford)

So that Opposition Members can understand more fully what my hon. Friend says about diversification, another Marconi company looked at its transponder work for satellite dishes, went into the television side and produced transponders for Alan Sugar's satellite terminals. That was an intriguing diversification. It was not, however, driven by the Government. It was driven by private industry looking for ways to diversify.

Mr. Burns

I am grateful to my hon. Friend, who has identified another area where the flair of private enterprise and the acumen and intelligence of the boffins can work together to identify something new and exciting to present to the market and, we hope, have a successful launch and then win orders and secure jobs.

We should not forget, either, the help that the Department of Trade and Industry gives by means of changing tack seminars, which encourage companies to build on their excellent skills and technology and develop new business through diversification. Many schemes focus not so much on the large defence companies but on small and medium-sized enterprises, of all natures. The enterprise initiative consultancy scheme provides financial support for consultancy help in designing, marketing and manufacturing systems and business plans and spurs support for products under research. The aim is to help to develop new products and processes, thus pulling research capability towards the marketplace. There are many exciting initiatives to help businesses of all sizes. They should be embraced and used to their nth degree to help businesses.

The KONVER programme was referred to briefly by the hon. Member for South Shields, but he was then diverted from it by an intervention. That scheme was devised by the European Commission. However, because of delays in the Commission notifying member state Governments, the programme is still being discussed and put together. It is an important programme. If the European Commission is to provide money, any member state should be able to take advantage of the funding made available.

I am sure that all hon. Members who have an interest in the subject will look closely at the result and will seek to push the interests of their constituencies, if they think that they could benefit from the programme. If there are to be European initiatives, it would be foolish of us not to take

It is crucial that the companies should be competitive and should diversify of their own free will with flair and initiative so as to be able to meet the challenges of the 1990s in a world where there will be fewer defence orders and compete successfully for both defence and nonmilitary orders, thus ensuring that people can get back into work and use their skills. Too many highly skilled people are out of work. They must be given every help to re-skill so that they can get back to work and once again be productive and generate orders and products for this country.

I am extremely grateful for this opportunity to debate a subject that is important to many of my constituents who have been going through a very tough time. It is important for them to know that they are not forgotten and that action is being taken at Government and company level to solve their problems and to give the individuals and companies involved the opportunity to flourish and get back to work as quickly as humanly possible.

Several hon. Members

rose—

Madam Deputy Speaker

Before I call the next hon. Member, may I point out that many hon. Members are seeking to catch my eye and it would be appreciated if those who are called to speak would keep their contributions as brief as possible.

8.40 pm

Mr. Malcolm Bruce (Gordon)

I am sure that the hon. Member for Chelmsford (Mr. Burns) is worried about his constituents, but his message is a little confused and contradictory. He began by saying how concerned he was about how many people in the defence industry were out of work, but concluded by saying that everything appeared to be going well. The two comments cannot be squared. He also appeared to denounce any new Government help but then welcomed a number of existing Government initiatives.

We must recognise the reality of the situation, a point mentioned by many hon. Members. We all make party political points about who will cut defence spending most —that is easy—but we must accept the facts. In 1984–85, spending on defence amounted to £26.3 billion; education spending was £24.9 billion, health spending £25.3 billion and social security spending £60.6 billion. In the last complete year, defence spending was down to £22.8 billion, education spending was up to £31 billion, spending on health amounted to £33.2 billion and spending on social security £75.9 billion. That is the reality of the cuts that have been imposed. Most people working in the defence industry are more interested in the current climate than in the threats of the Opposition, who, after all, did not win the election. The consequences of the cuts are that there has been real pain.

I always enjoy the speeches of the Minister of State for Defence Procurement. He said that he was surprised at his promotion, but I was not. We have debated a number of issues, and I believe that his promotion was well deserved, although he may be rather surprised at where he has ended up. He dealt constructively with a number of the issues that have been raised, but he must recognise that the cuts mean that orders are not reduced, which has repercussions for an important sector of our manufacturing industry and for the highly skilled people who work in it.

The trigger for this debate has been the crisis at Swan Hunter as a result of the placing of a recent order. I shall deal briefly with that issue and then make some more general comments.

Mr. Richards

Will the hon. Gentleman give way?

Mr. Bruce

No, I shall respond to the constraints of the Chair. I know that there is not a 10-minute limit, but I must press on.

The Minister and the hon. Member for South Shields (Dr. Clark) have made it quite clear that when there is a discrepancy of £70 million in a bid there is no question of choice. As someone who stood a little apart, I wondered why, given the scale of Swan Hunter's failure to make a competitive bid, expectations had run so high. What made Swan Hunter believe that it was close to winning the order? Was it a mistake on its part in wholly misreading the runes or misunderstanding the signals, or were there factors at play which it did not appreciate or of which it was not aware?

I welcome the fact that the National Audit Office has said that it will investigate. It will be no consolation after the event, but the investigation might come up with an answer. The Minister said that the Government would make the relevant information available, which is constructive.

Several questions arise from the placing of the order. The Minister said that the Government were not surprised by VSEL's bid but that they were surprised by the size of Swan Hunter's bid. That at least moves on the question that my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) asked in the House the other day. He wondered whether there was any sign that Swan Hunter had been encouraged or advised to include a wider spread of overheads and costs in its bid whereas VSEL was able to offset some of those costs because it had the benefit of previous contracts. I know that the Minister cannot answer that question directly, although he seemed to imply that that was not his understanding of the case.

We are given to understand that, although the two designs were similar, given the difference in price the guts must have been different, whatever they looked like. Alternatively, one must conclude that Swan Hunter was shooting in the dark at what it thought were the Ministry's expectations. Such questions need to be asked, and we shall no doubt hear more about them in due course.

Another issue that arises, not only in relation to Swan Hunter, is the Ministry of Defence's apparent slowness to pay. Apparently, £20 million is due to Swan Hunter. That may not have forced it into receivership—losing the contract was perhaps the final straw—but £20 million is a considerable sum for a company to be owed by the Government. It has often been said in the House that, of all organisations within our economy, the Government should set an example of prompt payment. It does not help British industry to know that they are setting a bad example.

If we are to run down our defence manufacturing base, will we have a strategic overview at the Ministry of Defence or the Department of Trade and Industry—or preferably the two together—as to what that base should be? That point is mentioned in the amendment that I and my right hon. and hon. Friends have tabled to the motion. We believe that the Government should accept that, although we cannot retain our capacity at the previous level if the requirements are not the same, we cannot allow the vagaries of the outcome of a bid at a particular time to determine what our future capacity is likely to be.

Do we, in the national interest, need the capability that exists at Swan Hunter? Does it matter, not to the people of the north-east to whom it clearly matters a great deal, but to the nation as a whole if we lose Swan Hunter? The Government do not appear to have considered that aspect. Some of us would have a little more confidence in the forward thinking of the Government's management of the defence base if there were evidence that it was being considered.

If it was concluded that a certain capacity was required, we should have more confidence if a strategy were then determined to ensure that that capacity was maintained. That is why we have suggested a 10-year review of procurement contracts. I accept that that may be regarded as a long-term view, but it would be proof that the Government were considering not only the Ministry of Defence's requirements but the industrial base to supply them over a reasonable time. I hope that Ministers will be able to tell us whether that is being considered.

The motion mentions diversification, to which the hon. Member for Chelmsford also referred. Point scoring apart, there is general agreement that our defence base has contracted and that further contraction is likely. On the positive side, we must accept that within our defence capability there is a great deal of skill and technology and a resource that should not readily be dispersed. It is said that 45 per cent. of all Britain's research and development expenditure goes on defence.

If we remove that from the economy and do not seek ways of replacing it, our research and development base will fall alarmingly in comparison to that of our major competitors, and our ability to maintain—or even achieve —a competitive edge will be seriously undermined. I accept that the Ministry of Defence may say that that is not its responsibility, but it certainly is the responsibility of the Department of Trade and Industry to calculate the consequences of the rundown in research and development.

It is fine to do as the Minister and other hon. Members did and cite examples of the successes of companies that have managed to diversify or to redeploy, but those are often large companies that have been able to take time to readjust. Other companies do not have the ability to respond as quickly, and for every success story there are stories of other companies that have not been able to move far enough or fast enough, either to stay in business at all, or to maintain anything like the size of their previous operations. For many companies it is wholly unrealistic to say that they should expand their research and development activities so as to move into new areas at a time when their market is contracting dramatically.

Private and City investors are likely to be a little sceptical about such a sudden switch, and about companies' ability to respond. Of course, some companies will be able to cope, but it is cavalier of the Government to dismiss out of hand the idea of agencies to assist companies that cannot adjust, or that require a little time. Yet it was the Minister who accused the Opposition of taking a cavalier attitude.

It is also important to realise that, however concerned we are to focus on the impact on the people of Tyneside of a disaster such as the Swan Hunter closure—there has been a catalogue of such events, and people understand what effect taking a major, long-established employer out of the heart of a community has on morale—the fact remains that the cut in defence expenditure affects almost every part of the United Kingdom economy.

The Minister said that more than 400 companies were regarded as major defence contractors, and my hon. Friend the Member for Bath (Mr. Foster) has given me a letter that takes the argument one stage further. A company in his constituency, Horstman Defence Systems Ltd., had a £300,000 order with Swan Hunter, and it looks like losing the outstanding balance of that, which amounts to £141,000. That company is probably not one of the 400-plus that the Minister identified, so we see the knock-on effect of the failure of a company such as Swan Hunter. There are signs that defence contractors in Scotland, in Wales and in the far south of England are affected, and we must recognise that many of those companies cannot respond quickly.

In my constituency we have a considerable number of high-technology companies engaged in the offshore oil and gas industry. The Department of Trade and Industry should take on board the fact that that industry is volatile; it goes up and down; confidence ebbs and flows, and activity increases and decreases. In the mid-1980s, there was a sharp downturn in North sea activity as the oil price fell. In order to protect their future and ensure that their market, was more broadly based, many of the high-technology companies diversified into—yes, defence contracting. They believed that they had developed on the civil side technology that had a military application, for which they could develop a comparable market. Just as they have managed to penetrate that market, it is undergoing a savage contraction.

The Government should consider whether there are any areas in which they could provide a legitimate stimulus, particularly for research and development and for high technology, to ensure that neither the peaceful nor the military applications of the technology are lost because of the sharp contraction in the market.

It has been pointed out to me that we probably have a smaller marine offshore research programme than do most of our major European competitors. France certainly spends a lot more money on marine and offshore research and development, and Germany probably does, too. That is a shame, in view of our status as an island nation. We ought to be leading the research and development technology for offshore activity, which, I may say, runs well with our naval expertise.

I should like the Minister to consider whether initiatives could be taken jointly by the Department of Trade and Industry and the Ministry of Defence to ensure that the technical expertise and capacity that we have developed in our defence and other high-tech industries are not lost simply because we have had to undergo a contraction that both sides of the House accept is necessary.

I urge the Government to take that idea seriously. If they do not, we may find that, in five or 10 years' time, our already weak high-tech capacity is further weakened because a public spending decision was taken without a full assessment of the implications for our trading and industrial base. I am glad that Ministers from both the DTI and the MOD are here, because it is proper that there should be a joint approach. I urge those two Departments to get together and to give us a long-term idea of a real strategy.

8.55 pm

Mr. John Wilkinson (Ruislip-Northwood)

Like other hon. Members, I regret that the debate should have to take place against the sombre backdrop of the awful news about Swan Hunter. I should have much preferred a two-day defence debate to take place long since, in which our overall defence equipment and procurement strategy could have been discussed within the general context of defence policy as a whole. Nevertheless, we must accept facts as they are and make the best of them.

At the outset I must declare two interests. One is political, inasmuch as I have the privilege of being on a postgraduate parliamentary industrial fellowship with TI plc, of which Dowty, TI Aerospace, is involved in military business. Secondly, I am a parliamentary adviser to Thorn EMI, which is an important defence contractor.

We shall face a growing squeeze on defence equipment procurement. I suspect that the Ministry of Defence now has the greatest difficulty in concluding its long-term costings and I know that many important programmes are under the severest critical scrutiny. Over the past eight years, the proportion of the defence budget allocated to defence equipment procurement has declined. In 1984–85, the proportion was 45.8 per cent., whereas in 1992–93—the most recent financial year for which I have figures from the Ministry of Defence—it was down to 37.3 per cent. The biggest annual drop, of 2.2 per cent., came between 1991–92 and 1992–93.

It is not surprising, therefore, that there should have been such severe redundancies. The human suffering which has been consequential upon the rundown of our defence industries has been marked, and has been felt not just on Tyneside but right across the country. It has been extremely severe in the south-east, with Rolls-Royce shedding workers at its small engine division at Leavesden, with British Aerospace losing workers from Kingston, Stevenage and Hatfield, and with job losses at Marconi and Thorn EMI. Thousands and thousands of extremely well qualified, dedicated people have lost their jobs and many communities have been hit very hard.

We must also recognise that, with our armed forces decreasing in number, it is more important than ever that we compensate for those reduced numbers by securing the very best equipment that money can buy—within reason, of course, because a balance has to be struck between quantity and quality. If we go overboard in trying to avoid gold-plating, there will be dangers of the kind that became evident in the Falklands war. The type 21 frigates, built cheap and light, were extremely vulnerable: the aluminium decks burned and the vessels were not as effective as we had hoped. We all remember the awful scenes or HMS Ardent burning in Carlos water.

It is erroneous to suggest that one can lightly forgo naval construction standards in respect of amphibious vessels. The House will remember what happened to Atlantic Conveyor as it carried our helicopters to the scene of the action—we lost most of our Chinooks when Atlantic Conveyor went down—and what happened off Bluff Cove, when the LSL Sir Galahad was attacked. Both vessels were subject to enemy air action.

To say that we need not worry too much about the standards of construction of the LPHs because there will be destroyer screens and so on is to overlook the fact that probably the greatest threat, apart from the submarine threat, will be from enemy air attack, often with stand-off weapons delivered at very great range. I understand why the Government have pursued the path that they have and why VSEL's consortium approach with Kvaerner Govan has found favour, but we must be careful when we seek always to go for the cheapest option.

As I said, the Government face many calls upon their equipment procurement budget. In the past year and a half or so, they have to their credit announced go-aheads for the Merlin helicopter, Challenger 2 tanks, Warrior APCs, Firefly trainers and the advanced short-range air-to-air missile, ASRAAM, among other programmes but there are many pressing projects which merit a go-ahead: the new transport aircraft, either to follow on from the Hercules—the C130J—or the future large aircraft; the support helicopters that the Royal Air Force so badly needs; the attack helicopters for the Army and, I trust, the Royal Marines; multiple-launch rocket system 3 ror our Army; in air-launched stand-off weaponry, the tactical air-to-surface missile and COSM, one nuclear, one conventional; a medium surface to-air missile; and long-range TRIGAT—the third-generation anti-tank guided weapons system. All those projects are bearing down upon a defence budget that is reducing constantly.

If we are to have properly equipped armed forces and defence industries that will be able to secure long-term employment for their dedicated work forces and continue to win-good orders, it will be very important to modify our defence policies to make those resources available. I would advocate greater use of reserves and a steady programme of withdrawal from Germany, if and when the Russians come out of the eastern part of that country. I do not believe that we can afford from any point of view to run down our defence industries further.

I wish to refer specifically to the Navy, which I know is dear to your heart, Madam Deputy Speaker, and which is of great concern to the House. We should not forget that the Navy will have to acquire not only the new LPH but two new LPDs. Those are the sort of vessels that Swan Hunter had an almost unique capability to build. Swan's is the one yard that can build everything from CVSs—aircraft carriers—to corvettes. I know the yard well. My company had the privilege of having it briefly as a client. I know the management team, which has devoted its livelihood to achieving the management buy-out. I know the work force and the dedication and skill which it has offered to the nation.

I recognise that Swan Hunter ships are regarded as the best in the Royal Navy. No one has supported them through thick and thin, and with greater dedication, greater conviction or more impressively than my hon. Friend the Member for Tynemouth (Mr. Trotter). In the last Navy debate, I was proud to say that I knew of no hon. Member with greater expertise of the naval construction industry than he.

I hope and trust that we will be able to rescue shipbuilding capability on the Tyne. We need it. The Horizon 2000 programme of anti-aircraft frigates must go ahead and eventually we will have to replace our existing Invincible class of aircraft carriers. We will also need more type 23s.

What lessons do I draw from this? I suggest that we need to be more open. I see no reason why we should not have open tendering, as in the United States, for major defence orders. I have said that before, I have written about it in books and I will continue to say it.

If we keep these matters under a wrap of secrecy, it does no one any good; it simply arouses suspicions. The congressional system in the United States allows the relevant committee to have an appropriations function and there is proper democratic oversight and scrutiny. I regret to say that we do not have it in this place.

At least the Americans have been able, through their congressional support, to maintain AV8A and AV8B—the Harriers I and II—in service with the United States marine corps which would not otherwise have happened. In addition, the V22 Osprey continues thanks to congressional support. We do ourselves a disservice by being as secretive as we are.

There is a disparity of £72 million. I have the actual figures and I will not embarrass my hon. Friend the Minister by repeating them. I will study the National Audit Office report with great interest as I have the real figures for VSEL and for Swan Hunter on both bids.

I suspect that the disparity arises from the huge profits that VSEL obtained from the Trident programme. The profits allowed it to pare its overheads. The factors include the differences in construction and the advice that Swan Hunter received from third parties which it hoped would be a party to the programme if the LPH went ahead on the Tyne. There are many factors and they will be revealed by the NAO.

However, in respect of the procurement business, I hope that we will learn the need for open tendering, for proper accountability to the House, for regular defence debates and for a defence procurement strategy that meets the problem of the hour, which is a declining defence budget in real terms with personnel costs that are not reducing and, ultimately, a need to develop a European dimension with the assumption by the Western European Union of the old function of the Independent European Programme Group.

I welcome this timely debate. I cannot support the defence diversification agency as I do not believe that it would do the job that the Opposition believe that it will. However, I hope and pray that my colleagues on the Government Front Bench can obtain the funds from the Treasury which our national defence needs and which our defence industry requires.

9.7 pm

Mr. David Jamieson (Plymouth, Devonport)

I am pleased to catch your eye tonight, Madam Deputy Speaker, because this subject is a matter of mutual interest to you and me as Plymouth representatives. I would like to move the debate a little further south and perhaps a little towards the west. Other than from my hon. Friend the Member for South Shields (Dr. Clark), we have heard nothing tonight about Plymouth and the south-west of England.

The south-west of England is the most defence-dependent area of Britain. In 1991, it was estimated that there were 187,000 defence-related jobs in the south-west. That is approximately one in 10 of the total work force.

I have made the point in the House before that Devonport was created for the needs of the Navy. The people came after the Navy. Since King William established the dockyard in 1691, it has had 302 years of service. In addition to defence-related jobs, Plymouth has a large number of service personnel.

It is worth stating in this debate that many people in Plymouth and the south-west have given their lives in conflicts during this century and in the years before it. I am bound to say that many civilians, too, who have worked in defence-related industries have given their lives. I draw testimony from the many widows whose husbands died from working with asbestos in the royal dockyards years ago.

We have lost thousands of jobs in the Devonport dockyard. Many thousands of jobs have been lost in other industries as well. Now we are seeing service personnel in our area lose their jobs. Our motion calls for action to save people who have served their country in one capacity or another from the humiliation of unemployment and the economic scrap heap. Many people who previously worked or currently work in the Devonport dockyard will be saying that Britain must now come to the aid of those who have come to the aid of Britain.

As has been said, Opposition Members accept the need for change. The defence industry, like other industries, must move with the times. Indeed, Devonport dockyard has distinguished itself in recent years by its ability to change, to adapt, to modernise and to diversify into other sectors in which it hitherto did not operate. Unlike the Government, we do not accept that the change in defence needs should automatically mean mass unemployment, skills lost to the economy, and the economic devastation of whole areas to Britain.

I recall the Conservative election promise before the election, which is now looking extremely hollow. I remember that the Conservative party said at the time that Labour's policies would lead to huge job losses in the defence industry. Conservative Members said that defence jobs were safe in their hands. The 8,000 people who have lost their jobs in the Devonport dockyard in the past five years will be asking whose fault it was that they lost their jobs. At the time they had a Tory city council, Tory Devon county council and a Tory Government. It was not the fault of the Labour party.

Since then, the people of Plymouth have had the good sense to realise that they have been betrayed by the Government and now they have a Labour city council. There are more Labour Members on Devonport county council than Conservatives. Given the chance at the next general election, the south-west will make sure that it has more than one Labour representative.

We have heard some of the reasons why diversification must take place. I would like to consider a range of Ministry of Defence activities in which diversification is needed, not just within the direct defence industries. It is not just a matter of the dockyard. In the 12 months since the election—since we were told that defence jobs would be safe in the hands of the Conservatives—we have had a drip-feed of disaster in Plymouth. The Royal Naval armaments depot in Ernesettle in my constituency is absolutely vital to the back-up work of servicing weapons. We are told now that there is a projected loss of 400 jobs in that establishment.

The Royal Naval engineering college, in which you, Madam Deputy Speaker, have taken great personal interest, and which is in Manadon in my constituency, is the Navy's only university. For more than 50 years it has had a distinguished record of producing engineering graduates of the very highest quality for the Navy. It undertakes postgraduate work that is unavailable elsewhere, serving navies throughout the world, yet we hear that a decision will be made shortly to close the Royal Naval engineering colleges, with a loss of about 300 local jobs. There has been no consultation and no thought of how those jobs might be used in the future.

We have in my constituency the Goshen Yard training school which at one time trained up to 700 engineering apprentices for the dockyard. It is currently run by a company owned by the college of further education in Devonport called Devonport Training for Quality. Now there are just a handful of students in that building. It is unique in the south-west and it contains facilities of huge potential value to other businesses and industry in the region.

Recently, British Rail and South West Water, among other large concerns in the region, have been showing great interest in the training available at the Goschen Yard school. How has the Ministry of Defence reacted to that? Negotiations between Devonport Training for Quality and the Ministry of Defence have been drifting for months. Through sheer frustration, the company has had to impose a deadline of the end of June for the achievement of a long-term lease of the premises.

If negotiations fail, the company will move to other, less suitable premises and the school—with its unique facilities —will be lost to the economy of Plymouth. I ask the Minister to act to ensure that Devonport Training for Quality has a long lease on the premises, to enable vital training work to continue.

Our dockyard in Devonport employs just over 5,000 people; five years ago, it employed 13,500. Its future now hangs on the decision on the Trident nuclear refit contract. The Minister may recall the Secretary of State for Defence saying, in a BBC television programme on 19 August last year: the decision will be made before Christmas. Perhaps he can enlighten the House about which Christmas he had in mind.

So concerned were Ministers to secure a decision, as a matter of urgency, that the Minister of State for the Armed Forces—who was present earlier—said on 12 January that he hoped to "make an announcement shortly". That urgency was reflected in last night's Adjournment debate, when the Minister of State for Defence Procurement was so gripped by anxiety for a swift decision that he regretted that the process had taken longer than I had hoped."—[Official Report, 18 May 1993; Vol. 225, c. 222.] This important decision—important, that is, to Plymouth and the south-west and to Scotland—has been subjected to procrastination, fumbling and delay by a Government who have nothing as urgent as "manana" in their lexicon. People in the south-west are asking, "Where is the planning? Where is the strategy? Who is driving the defence changes—the Ministry of Defence or the Treasury?" The thousands who have lost their jobs and the many thousands of loyal workers whose jobs are threatened have the right to an answer.

The Government's defence policy in regard to jobs is in tatters. Even on such important matters as surplus MOD housing, the Government dither while houses are vandalised. Around the country, the Ministry now has 9,291 empty properties, 527 of them in Plymouth—21 per cent. of the total. What has been Ministers' response over the past five years?

Hon. Members on both sides of the House have asked questions. On 24 October 1988, we were told: Over the next 12 months it is expected that 164 will be offered for sale … sold on the open market."—[Official Report, 24 October 1988; Vol. 139, c. 62.] On 11 May, we were told: Many of the vacant properties are undergoing modernisation … others are being prepared for disposal."—[Official Report, 11 May 1989; Vol. 152, c. 522.] The latest answer in this catalogue is the one that I received on 4 May: to ensure the early reuse of the dwellings arrangements are now in hand to sell the estate on the open market."—[Official Report, 4 May 1993; Vol. 224, c. 20.] The Government have certainly proved that procrastination is the art of keeping up with yesterday.

Earlier this evening, the Minister quoted Aneurin Bevan; I hope that he will forgive me if I quote Winston Churchill—not the rather troublesome Winston Churchill who often sits across from me in the Chamber, but one from an earlier era. He said: They are decided only to be undecided, resolved to be irresolute, adamant for drift, all-powerful for impotence. Plymouth and the south-west have great potential. The people have many skills; the city council is helping to provide an environment in which new enterprise can flourish and new ideas can develop. However, we desperately need the planning and co-ordination that a diversification agency could bring. At present, the south-west is like a sinking ship with Ministers throwing men overboard without supplying lifeboats. That is why I urge hon. Members to vote for our motion.

9.19 pm

Mr. Neville Trotter (Tynemouth)

The House will not be surprised to hear that I intend to concentrate on the disastrous consequences that have flowed from Swan Hunter not winning the order for the landing platform helicopter carrier, followed by the immediate collapse of that esteemed and proud company. All hon. Members can understand the effect of that awful news on Tyneside.

Swan Hunter had already slimmed to a shadow of its former self but was still a major employer and a proud part of our traditional industrial scene. It is a company of which all on Tyneside have been justly proud for many years. It has a record that is second to none in its performance in turning out magnificent ships for the Royal Navy, including ships with no defects whatever—senior admirals have told me that that is almost impossible to achieve.

We meet for this debate tonight under a great cloud of sadness at the news that Swan Hunter lost the order. It has closed its doors under its present ownership and a receiver has been appointed. The House will appreciate how our local community has been hit hard in its mind, its soul and its prospects by this tragic news.

Every effort must be made to create alternative economic activity in Wallsend and on Tyneside. We have reason to be hopeful because we have a good record in the north-east of inward investment from abroad. We have experienced regional agencies—there are none better in the United Kingdom—for attracting and using to the utmost the tools that are available for the creation of new employment and new industry. I welcome the new enterprise zone. Such zones have proved successful in other parts of the country and we are determined that the enterprise zone will prove successful for the people of Tyneside, too. We have the assurance of continued regional assistance status which will be helpful to the whole area. Of course, our principal asset is our excellent local labour force.

My main aim tonight is to concentrate on the future of Swan Hunter. In the light of some of the comments made earlier, I shall refer to its recent history for a moment. First, I pay tribute to the yard's great achievements. It has built ships of the highest quality and concentrated recently on warships. The yard tried ceaselessly to obtain export orders—an enormous amount of effort has gone in that direction. Sadly, there was no prospect of success until recently, although ironically at the last minute there was hope of obtaining an order for two ships for Oman. Even in the present circumstances, I hope that it will be possible for Swan Hunter to build those two Omani ships.

I must remind the House that Swan Hunter is still continuing to operate at present, and it would be very good news if it could build those two ships. We are talking about a yard with the highest standard of technology and a first-class design facility which is not bettered anywhere in the country or—I would like to think—in the shipbuilding world.

Recently there has been a steady slimming of the Swan Hunter labour force. I found it interesting to be reminded of these figures. In 1981, there were well over 9,000 people working at Swan Hunter. The number fell steadily over the years to 7,000 in 1984, 4,000 in 1985, then 3,000 and now 2,200 today. Recently, there have been a number of sad blows. We lost the last frigate order. Sadly, we were not second in the competition—we were third. That shows the tremendous competitive pressures in the warship building industry. It is perfectly legitimate for the House to consider whether the possible end of warship building at Swan Hunter unfortunately limits the competition for the future. That negative effect should be borne in mind when we contemplate the ultimate future of Swan Hunter as a warship building unit.

Swan Hunter diversified into building the Antarctic survey vessel. I understand that a large loss' was made on building this superb ship, but I do not know the reason for that. Latterly, the yard ran into severe financial difficulties—that had been the case for some months. At the end, it was hanging on by its financial fingernails from day to day. It was entirely dependent on that one order, which we all hoped that Swan Hunter would win.

I do not know what the Vickers figures were, but I have been told the Swan Hunter figures. The initial bid was £174 million. I trust that my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) can confirm that figure. The £174 million rose to £210 million. I am sure that my hon. Friend agrees with my figures. I was alarmed when the final bid was increased by £36 million. A question was asked earlier about when the final bid went in. I believe that it happened on 22 April.

It is unfortunate in any bidding process to add a figure of that size to one's bid at the final stage. When the National Audit Office report comes out I shall read with interest the circumstances which required that huge increase in the bid. I fear that it may well have been the final straw.

Mr. Wilkinson

My hon. Friend is enlightening the House on important matters. He is right that the first bid was £174 million. The final bid from Swan Hunter was £210 million, but it was revised upwards to £230 million. There is a suggestion—it may be contradicted—that Ministry of Defence officials were not averse to that upward adjustment. I do not know whether that is true. My hon. Friend may be able to elucidate. However, it was instructive and interesting that from the first to the second bid the VSEL-Kvaerner bid went down, not up.

Mr. Trotter

It is a feature of commercial haggling that one tends to bring one's price down at the final stage to secure the contract. That is why I have in my mind the question about how Swan Hunter was ill advised, required or forced, perhaps by financial pressures—we shall know in due course when the auditor reports—to make an enormous increase of 30 or 40 per cent. in its original bid. I have been given the figure of £210 million as the final bid that was entered.

I was amazed when I heard about the incredibly large difference. Of course there is always a loser and a winner. There is always a difference. But a difference on this scale seemed beyond normal experience. I asked my right hon. Friend the Minister whether I could talk to the Controller of the Navy and he was good enough to agree to that. I received assurances, one of which I relayed to the House this evening, from the controller. His basic assurances were that both yards had been asked to design for the same requirements, and that the Navy was perfectly satisfied with the ship that it was getting. When I asked him about the price, he said that it was in line with the original estimate of the cost to the Navy.

It was not sufficient on an issue of this enormous significance and effect on Tyneside that an individual Member of Parliament should have simply an assurance from the Controller. The Controller is a most honourable man whom I have known and respected for many years. He gave me answers to my questions. It seemed to me that the issue was so great that a formal independent inquiry was required. That is what the directors of Swan Hunter requested.

Therefore, I contacted my hon. Friend the Member for Upminster (Sir N. Bonsor), the Chairman of the Defence Select Committee. He accepted that an emergency meeting should be held. At that meeting, the members of the Committee, including myself, agreed that an inquiry should be undertaken. We were prepared to undertake the inquiry ourselves if the NAO did not accept our invitation.

It is in everyone's interest that the NAO has accepted the invitation. It is the best qualified body to undertake the inquiry. It has the power to send for all information and all persons. It has expert staff to carry out the inquiry. I know that the whole House and certainly the whole of Tyneside will await its ultimate conclusions with the greatest of interest.

In the light of some of the comments made earlier tonight, it is fitting to say that I am convinced that the ship would never have been built if we had had a Labour Government. There is no doubt in my mind about that. Only a few months ago, the Labour party voted overwhelmingly for a cut of £6 billion or £7 billion a year in defence spending. That is equivalent to the whole cost of the Royal Navy, and about four times what we spend each year on the purchase of ships for the Navy.

The most important matter that I wish to draw to the attention of the House is the immediate and critical decision that the three frigates being built on the Tyne should be completed there. That is essential to the ongoing future of the great skill centre at Swan Hunter. If there is to be any future for that firm, it is essential that those frigates be built there. Yesterday afternoon, I saw my right hon. Friend the Prime Minister in connection with this matter, and I noted his words: I share the concern of you and everyone on Tyneside that Swan Hunter should be able to complete the type 23 frigates if at all possible. We have that aim very much in mind in our current discussions with the receiver. I hope that those discussions will be speedy. I understand the complexity of what is involved in renegotiating from the start, but it is essential that the uncertainty on Tyneside be brought to an end as soon as possible. I believe that we can finish those ships to our normal high standards and specifications, and at a better cost than could be achieved by their removal to any other place. I need hardly stress the significance to Tyneside of this decision. The future of Swan Hunter and of its new owners depends entirely on it.

There has been some reference to a takeover of Swan Hunter. It was quite clear that the company could not have continued independently, even if it had obtained the LPH order. Heads of agreement between Swan Hunter and GEC had been signed. If the order had gone to Swan Hunter, GEC would immediately have taken the company over and would presumably have put in the cash that was needed to keep it going. I hope that, even in the present circumstances, we shall still see such a move. GEC is one of our great companies. It has intimate knowledge of the background of the technology and of every other feature of Swan Hunter. It has been through all aspects of the business.

I am told by the receiver that there has been an encouraging number of inquiries about the future of the yard. He can be assured that all hon. Members will give him every possible assistance as he seeks to provide further activity to ensure a future for Swan Hunter. This is a matter of the greatest concern to the people of Tyneside.

9.32pm

Mr. Stephen Byers (Wallsend)

In the very brief time available to me I do not want to dwell on the events of last week, but I have to say that the concern that people on Tyneside feel about the way in which the LPH contract was awarded has not been lessened by today's admission of Kvaerner Govan's commercial director, David Smith, that his company tendered for a commercial ship, not a naval vessel. The fact that an LPH carrying Royal Marines into trouble spots will have been built to the same specifications as a passenger ferry must cause great concern among many hon. Members.

Mr. Davidson

Will my hon. Friend give way?

Mr. Byers

As I have only two minutes, I cannot give way.

The sequence of events last week has galvanised the community on Tyneside around a very simple campaign, which has a number of clear and precise objectives. Paramount is the fact that we wish to retain a shipyard and a shipbuilding capacity on the Tyne. If we are to be successful in that regard, it is imperative that we retain the design team. We must retain the technical expertise at Swan Hunter. There must be no steps to declare any of those people redundant until all the options and all the potential buyers have been investigated.

Secondly, the order for the three type 23 frigates, on which work is continuing as normal, must be guaranteed by the Ministry of Defence. Assurances from Ministers —even from the Prime Minister—that the Government will use their best endeavours are not enough; the work must be guaranteed within the next few days.

Thirdly, we know that there are other Ministry of Defence orders in the programme. These should be brought forward as a matter of urgency. Those orders include refits on three landing ships, an AOR3 and a batch of new type 23 frigates. There must be access to intervention funding so that there can be diversification in future into the merchant sector. Help must be given with export orders. A tender went in last Friday for a contract in Oman. I hope that the Government will give all possible assistance to efforts to secure that tender.

Mr. Aitken

We are in touch with the Omani authorities and have been trying to be as helpful as possible to Swan Hunter in receivership.

Mr. Byers

I am grateful for those comments.

Tyneside is not using special pleading, but asking for fair play. Shipbuilding is vital to the manufacturing and industrial base of Tyneside. If the Government thought that the people of Tyneside would sit back and let shipbuilding die, they made a grave error. The survival of shipbuilding is vital to provide jobs for the present and a future for our children. With political will, our objectives can be achieved. The country will be waiting to see what action the Government will take to retain shipbuilding on Tyneside.

9.36 pm

Mr. Derek Fatchett (Leeds, Central)

Naturally, much of tonight's debate has centred on the problems facing Swan Hunter and what a number of my hon. Friends have described as the human and commercial tragedy in Tyneside. The sad fact is that, while Swan Hunter makes an immediate focus for tonight's debate, over the past two or three years there has been a catalogue of defence companies in all regions that have faced exactly the same problems as Swan Hunter.

The list of companies is not a catalogue of doom and gloom, but is crucial in relation to the argument. It contains Swan Hunter, Cammell Laird, VSEL at Barrow —which has lost substantial numbers of jobs even though it won the recent contract—British Aerospace at Kingston upon Thames, British Aerospace in Lancashire, British Aerospace dynamics division in Bristol, Rolls Royce military engines division in Bristol, British Aerospace in Stevenage, GEC Avionics in Kent, the royal ordnance factories in Nottingham and Vickers in Leeds. All those companies have experienced substantial job losses.

Mr. Richards

Will the hon. Gentleman give way?

Mr. Fatchett

No, because we are short of time and we have already heard an intervention from the hon. Gentleman.

The crucial point about each of those companies is that the change in job structure and employment opportunities has not occurred as a result of technological changes as the Minister argued, but as a result of changes in the market place.

The Minister claimed that the Labour party—it could also be said of the Liberals—was trying to advance the argument that the defence industry was "tottering towards the grave". Nothing could be further from the truth. My hon. Friend the Member for South Shields (Dr. Clark) recognised the success, importance, achievements, technology and skills of many of those companies. The Opposition do not want to run down the industries, but advance an argument to show the problems that those companies face in the marketplace.

The list of companies is strategically important to the British industrial base for a variety of reasons, including the fact that a major skills base exists in our defence-related industries, which contain many of our best trained employees. The same is true of shipbuilding and aerospace. I saw a comment last week—I think made by the Minister with responsibility for industry—that some of the arguments in relation to Swan Hunter sounded like those of the 1970s. The Minister is out of touch with the substantial technological changes that have taken place in shipbuilding and does not understand the high level of technology and skills involved in that industry.

When British Aerospace announced 2,000 redundancies at its Kingston plant, according to a survey by the local training and enterprise council 45 per cent. of the laid-off workers were professional and technical staff and another 20 per cent. were skilled craft workers—all of them crucial to the country. Such workers are leaving manufacturing industry because they feel that their skills have been undervalued and their jobs made insecure. I fear that many of them are going into the service industries. So we are losing skills into which a great deal of investment has gone for a number of years. We need those skills for our future industrial performance.

The research and development base is crucial not just to the defence industries but to the spin-offs in the civilian sector. These companies make large investments, often with Government money and often in Government-sponsored research or collaboration projects. If we take away this base the country will be left lagging behind in R and D and falling even further behind in its ability to compete with Europe.

According to a recent European Commission report, Britain has the second most defence-dependent economy in the EC after France. My hon. Friend the Member for Bolton, South-East (Mr. Young) and the hon. Members for Chelmsford (Mr. Burns) and for Gordon (Mr. Bruce) all arrived at the same conclusion: defence companies must now operate in a changed framework. The collapse of the Soviet Union was an important part of that change. Recalling the defence debates of a few years ago, we may note that the whole object of Conservative defence expenditure was directed at the Soviet Union. I had hoped that the Conservative Members who used that argument would plan for the future. It seems that they now recognise that the Soviet Union has collapsed and that the framework has changed.

Putting aside all petty party political points, the Minister told us—he does not appear to have got the point across to his own Back Benchers—that the Government plan to cut defence expenditure by 9 per cent. in the next three years. Speakers from all parties have agreed on that changed framework.

What do the Government believe they should do in these circumstances? We all recognise the importance of the defence companies, skills and R and D. The crisis encompasses not only our defence capacity but our whole industrial base. The Government's answer is, "Don't bother us; don't ring us; leave it all to the marketplace." We know what happens in the marketplace. The market has been deliberately shrunk by Government action. Our Government and other Governments have reduced their defence budgets.

If we leave the defence industries to the marketplace, it will be a case of Swan Hunter today, other companies tomorrow. The list will continue to grow. The Government are washing their hands of their responsibility. Typically, Conservative Members blame the Government, but will do nothing about the problem.

Defence-related companies have not in any case operated in a free market. They have depended on Government action in all sorts of ways. They have depended on the Government for domestic defence procurement. They have enjoyed what one might term an agreed market, owing to Government action. They have had significant Government funding for research and development and significant Government help with exports. The Government have clearly been involved in the overseas orders won by Britain's defence companies.

The market is not free, because there is direct Government intervention. The Government propose to wash their hands of companies whose success and viability depended on Government intervention, and they are doing that just when those companies need their help.

Some hon. Members, including the hon. Member for Chelmsford were absolutely right when they said that we should take a strategic view. But we all know that markets cannot take a strategic view: they cannot plan ahead. The Government are abdicating their responsibilities and again looking for an opt-out clause. One day it is Maastricht and the social chapter, the next day they opt out of their responsibility for our industrial base.

Other Governments and countries recognise the problems. In opening the debate for the Opposition, my hon. Friend the Member for South Shields (Dr. Clark) spoke about the French, the Germans and the Americans. Those Governments are taking action and recognising the problem. Ours is the only Government who feel that they can abdicate all their responsibilities for those matters.

We are not debating just defence expenditure but the need to protect Britain's industrial base. That is why Labour has demanded intervention and is arguing for a defence diversification agency. The Government must play a role in partnership with companies and employees so that Britain's industrial base can be rebuilt and maintained. No other country would abdicate its responsibility for companies of such importance.

When asked to choose between action to protect our industrial base or inaction, on every occasion the Government and the Minister of State for Defence Procurement choose inaction. That is why I ask my hon. Friends to vote for our motion, because only the Labour party has a strategy for the future and is concerned about our defence industry and our industrial strategy.

9.46 pm

The Minister for Industry (Mr. Tim Sainsbury)

I welcome this debate, and also welcome the hon. Member for Leeds, Central (Mr. Fatchett) back to it. I am sorry that he missed so many of the contributions.

The debate has brought out some of the positive aspects of changes in the defence market, as well as some of the inevitable disadvantages. Not for the first time, the incoherence of Labour policy on defence has been revealed.

We all know that the end of the cold war means that the United Kingdom's defence spending can decline by about 3 per cent. a year for the next three or four years. The effect of that on companies in the defence industry and on the areas in which they are located will vary. On the positive side, as my hon. Friend the Minister of State for Defence Procurement said, competitive procurement has helped our defence industrial base to become one of the most efficient and successful in the world. It would be nice to have that recognised more fully by the Opposition.

Mr. Ian Bruce

Is my right hon. Friend rather surprised that throughout the debate, the thrust of which has been about policy to help Tyneside, no one has mentioned the fact that the defence diversification agency, which was suggested by the Opposition, was rejected by the Select Committee on Employment which looked at that issue? The three measures that the Government have announced were those that the Select Committee report advocated in the context of the Government and enterprise agencies.

Mr. Sainsbury

My hon. Friend makes an effective point; I shall speak later about the concept of a defence conversion agency.

Our defence industrial base is, as my hon. Friend the Minister of State for Defence Procurement said, proving its competitiveness in the international markets. The success of our exports, which have increased two and a half times since the mid-1980s, is evidence or that, as is the fact that we are now the second-largest exporter, having overtaken France in the past few years. Defence is a net contributor to the balance of payments and sustains about 120,000 jobs through exports. Last year, the total value of export contracts signed was about £5 billion, a record level for our defence industry.

During the debate, a number of ideas have been put forward and a number of schemes have been mentioned, and I want to say something about some of them. My hon. Friend the Member for Chelmsford (Mr. Burns) drew attention to a scheme called KONVER, which is the latest in a series of Community structural fund initiatives, prepared by the EC Commission with the intention of addressing the problems of a specific industry.

The Government object strongly to such schemes in general, since they take such a partial approach to industrial adjustment. We object to KONVER in particular because of the mismatch between the areas where there are or may be job losses in the defence industry and the objective 2 and 5b areas which may be the only areas eligible for support.

Another serious deficiency in the scheme is the level of our allocation. It fails to reflect the importance of our defence manufacturing. We are making a forceful representation to the Commission about the way in which the funds are apparently being allocated. However, I agree with my hon. Friend that, if there is to be a scheme, it would be foolish not to take advantage of it. I hope that member states' KONVER programmes will be approved by September and we shall obviouly proceed if we get that approval.

Mr. Nicholas Brown

Will the Minister give way?

Mr. Sainsbury

No, there is no time to give way.

I come now to the important matter of Swan Hunter. The past achievements and the present plight of Swan Hunter were described most eloquently by my hon. Friend the Member for Tynemouth (Mr. Trotter). I shall say something first about claims which it has been suggested are a problem. It has been said that the Ministry of Defence owes Swan Hunter money. The Ministry of Defence has been scrupulous in making timely payments to the company, both on the AOR and on the type 23 frigate contracts, in full accordance with the terms of those contracts. The Ministry of Defence does not accept that it owes the company money.

Swan Hunter has made a claim for losses that it says it incurred on the replenishment vessel AOR2. That is a complex matter which the Ministry of Defence has been assessing as quickly as possible. It has been unable to accept some of the claim, but has made interim payments totallirt no less than £8 million. I remind the House that the Ministry of Defence has obligations under the Insolvency Act 1986 and it could not responsibly have paid any more at this time. I confirm to my hon. Friend the Member for Tynemouth that the best and final offer date was, as he said, 22 April 1993.

Let me say something briefly in the time available about our response to what we are well aware to be serious consequences for Tyneside of the receivership of Swan Hunter. We recognise that this is a blow to those employed in the yard, their families, the local suppliers and the whole community, particularly in view of the yard's long and distinguished history as a warship builder.

My Department is keeping in close touch with the receiver to see that prospects for maintaining some engineering or shipbuilding-related activities are fully explored. We shall also be doing all we can to see that new jobs are brought to the area. I announced last week a package of additional measures to help attract new investment and new jobs. In the time available, I shall not rehearse them this evening, but attracting new inward investment will be important. It is lucky that the region has a good record on that. Some good inward investment projects are in prospect, and my Department and the Northern Development Company are pursuing them energetically for the north-east.

Opposition Members were dismissive of a package of measures such as that which I describe. Enterprise zones and other special regional initiatives have been most successful in helping to attract new investment in the wake of closures—[HON. MEMBERS: "In Sunderland?"] I will come to Sunderland in a moment, if members of the Opposition Front Bench will refrain from sedentary interventions.

Corby is an excellent example. There, 3,500 steel jobs were lost, but since then 13,000 jobs have been created. The Gateshead zone attracted substantial private sector investment and 2.75 million sq ft of new space—mainly industrial—has been produced. At Consett, 3,500 jobs were lost, but 4,000 replacement jobs were created.

As to Sunderland, the Government's special package of measures announced in 1988 resulted in the creation of 3,750 jobs. It can be done—and, I am happy to say, all concerned will be pulling together to see that it is done. Local partnerships are vital. There is an excellent record of co-operation in the north-east on which to build.

We heard a lot about defence conversion. We should talk not about conversion but about diversification, because that is a more realistic and useful objective. We are talking about firms building on their enormous technological skills and know-how, to increase their penetration of civilian markets. Related diversification has succeeded in reducing many firms' dependency on defence, from something like 100 per cent. to nearer 70 per cent. My hon. Friend the Member for Chelmsford gave examples of achievements by Marconi—an important company in his constituency.

I remind the House of the measures that we take to help companies. We encourage innovation. We have the enterprise initiative and training and enterprise councils are giving particularly useful help to firms with counselling, information and advice, training and business skills. More specifically, my Department supports company efforts to diversify through the series of "Changing Tack" regional seminars held over the past year to highlight diversification possibilities.

My hon. Friend the Minister of State for Defence Procurement asked pertinent questions about the Opposition's proposal for a defence conversion agency. What would it do? What is it meant to do? How would it undertake its task? If subsidies were to be involved, how compatible would they be with the level playing field that the Opposition always seek? From where would the money come? I share the scepticism expressed by my hon. Friend the Member for Ruislip-Norwood (Mr. Wilkinson).

At the end of this debate, we are no wiser as to what that agency would do. I am reminded of King Lear's words: I will do such things— What they are yet, I know not. We are in the same position in respect of the defence conversion agency.

The debate exposed the absurdity of Labour's proposal for such an agency—son of the National Enterprise Board, if ever there was one. It reveals once again the depth of Labour's lack of understanding of how to help British industry become more competitive and better able to create sustained employment. It has exposed something more—the hypocrisy of a party that consistently voted for massive reductions in defence spending, but then cynically complains about potential job losses in the very defence industries that Labour's policies would decimate.

That is a typical example of political expediency from a party that does not have the courage to face the facts and tell its supporters the truth. The motion was put before the House tonight for one purpose only—to get the Labour party off the hook.

Nor do we need reminders about the shamefaced shambles that characterises Liberal Democrat policy. Or should I say policies, because that party has as many policies as it has members—and a different lot for tomorrow. It puts me in mind of Kipling's couplet: There are nine and sixty ways Of constructing tribal lays, And every single one of them is right. The trouble with Liberal policies is that most of them are left and all of them are wrong.

I commend the amendment to the motion to the House. The Labour party has had 14 years of irresponsibility over defence policy. It has not learnt. It still sees phantom orders for phantom ships pursuing phantom enemies.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 263, Noes 304.

Division No. 276]	[10 pm
AYES
Abbott, Ms Diane	Campbell, Menzies (Fife NE)
Adams, Mrs Irene	Campbell, Ronnie (Blyth V)
Ainger, Nick	Campbell-Savours, D. N.
Ainsworth, Robert (Cov'try NE)	Canavan, Dennis
Allen, Graham	Carlile, Alexander (Montgomry)
Alton, David	Chisholm, Malcolm
Anderson, Ms Janet (Ros'dale)	Clapham, Michael
Ashdown, Rt Hon Paddy	Clark, Dr David (South Shields)
Ashton, Joe	Clarke, Eric (Midlothian)
Austin-Walker, John	Clarke, Tom (Monklands W)
Banks, Tony (Newham NW)	Clelland, David
Barnes, Harry	Clwyd, Mrs Ann
Barron, Kevin	Coffey, Ann
Battle, John	Cohen, Harry
Bayley, Hugh	Connarty, Michael
Beckett Rt Hon Margaret	Cook, Frank (Stockton N)
Beith, Rt Hon A. J.	Cook, Robin (Livingston)
Benn, Rt Hon Tony	Corbett, Robin
Bennett, Andrew F.	Corbyn, Jeremy
Benton, Joe	Corston, Ms Jean
Bermingham, Gerald	Cousins, Jim
Berry, Dr. Roger	Cryer, Bob
Betts, Clive	Cummings, John
Blunkett, David	Cunliffe, Lawrence
Boateng, Paul	Cunningham, Jim (Covy SE)
Boyce, Jimmy	Cunningham, Rt Hon Dr John
Boyes, Roland	Dafis, Cynog
Bradley, Keith	Darling, Alistair
Bray, Dr Jeremy	Davidson, Ian
Brown, Gordon (Dunfermline E)	Davies, Bryan (Oldham C'tral)
Brown, N. (N'c'tle upon Tyne E)	Davies, Rt Hon Denzil (Llanelli)
Bruce, Malcolm (Gordon)	Davies, Ron (Caerphilly)
Burden, Richard	Davis, Terry (B'ham, H'dge H'l)
Byers, Stephen	Denharn, John
Callaghan, Jim	Dewar, Donald
Campbell, Mrs Anne (C'bridge)	Dixon, Don

Donohoe, Brian H.	Lewis, Terry
Dowd, Jim	Litherland, Robert
Dunnachie, Jimmy	Livingstone, Ken
Dunwoody, Mrs Gwyneth	Lloyd, Tony (Stretford)
Eagle, Ms Angela	Llwyd, Elfyn
Eastham, Ken	Loyden, Eddie
Enright, Derek	Lynne, Ms Liz
Etherington, Bill	McAllion, John
Evans, John (St Helens N)	McAvoy, Thomas
Ewing, Mrs Margaret	McCartney, Ian
Fatchett, Derek	Macdonald, Calum
Faulds, Andrew	McKelvey, William
Field, Frank (Birkenhead)	McLeish, Henry
Fisher, Mark	McMaster, Gordon
Flynn, Paul	McWilliam, John
Foster, Rt Hon Derek	Madden, Max
Foster, Don (Bath)	Mahon, Alice
Foulkes, George	Mandelson, Peter
Fraser, John	Marek, Dr John
Fyfe, Maria	Marshall, David (Shettleston)
Gapes, Mike	Marshall, Jim (Leicester, S)
Garrett, John	Martin, Michael J. (Springburn)
George, Bruce	Martlew, Eric
Gerrard, Neil	Maxton, John
Gilbert, Rt Hon Dr John	Meacher, Michael
Godman, Dr Norman A.	Meale, Alan
Godsiff, Roger	Michael, Alun
Golding, Mrs Llin	Michie, Bill (Sheffield Heeley)
Gordon, Mildred	Michie, Mrs Ray (Argyll Bute)
Gould, Bryan	Milburn, Alan
Graham, Thomas	Miller, Andrew
Grant, Bernie (Tottenham)	Moonie, Dr Lewis
Griffiths, Nigel (Edinburgh S)	Morgan, Rhodri
Griffiths, Win (Bridgend)	Morley, Elliot
Grocott, Bruce	Morris, Rt Hon A. (Wy'nshawe)
Gunnell, John	Morris, Estelle (B'ham Yardley)
Hain, Peter	Morris, Rt Hon J. (Aberavon)
Hall, Mike	Mowlam, Marjorie
Hanson, David	Mudie, George
Hardy, Peter	Murphy, Paul
Harman, Ms Harriet	Oakes, Rt Hon Gordon
Harvey, Nick	O'Brien, William (Normanton)
Hattersley, Rt Hon Roy	O'Hara, Edward
Henderson, Doug	Olner, William
Heppell, John	O'Neill, Martin
Hill, Keith (Streatham)	Orme, Rt Hon Stanley
Hinchliffe, David	Parry, Robert
Hoey, Kate	Patchett, Terry
Hogg, Norman (Cumbernauld)	Pendry, Tom
Home Robertson, John	Pickthall, Colin
Hood, Jimmy	Pike, Peter L.
Hoon, Geoffrey	Powell, Ray (Ogmore)
Howarth, George (Knowsley N)	Prentice, Ms Bridget (Lew'm E)
Howells, Dr. Kim (Pontypridd)	Prentice, Gordon (Pendle)
Hoyle, Doug	Prescott, John
Hughes, Kevin (Doncaster N)	Primarolo, Dawn
Hughes, Robert (Aberdeen N)	Purchase, Ken
Hughes, Roy (Newport E)	Quin, Ms Joyce
Hutton, John	Radice, Giles
Illsley, Eric	Randall, Stuart
Ingram, Adam	Raynsford, Nick
Jackson, Glenda (H'stead)	Redmond, Martin
Jackson, Helen (Shef'ld, H)	Reid, Dr John
Jamieson, David	Rendel, David
Janner, Greville	Robertson, George (Hamilton)
Jones, Barry (Alyn and D'side)	Robinson, Geoffrey (Co'try NW)
Jones, Ieuan Wyn (Ynys Môn)	Rogers, Allan
Jones, Jon Owen (Cardiff C)	Rooker, Jeff
Jones, Lynne (B'ham S O)	Rooney, Terry
Jones, Martyn (Clwyd, SW)	Ross, Ernie (Dundee W)
Jones, Nigel (Cheltenham)	Rowlands, Ted
Jowell, Tessa	Ruddock, Joan
Kaufman, Rt Hon Gerald	Sedgemore, Brian
Keen, Alan	Sheerman, Barry
Kennedy, Jane (Lpool Brdgn)	Sheldon, Rt Hon Robert
Khabra, Piara S.	Shore, Rt Hon Peter
Kilfoyle, Peter	Short, Clare
Kirkwood, Archy	Simpson, Alan
Leighton, Ron	Skinner, Dennis
Lestor, Joan (Eccles)	Smith, Andrew (Oxford E)

Smith, C. (Isl'ton S & F'sbury)	Wareing, Robert N
Smith, Llew (Blaenau Gwent)	Watson, Mike
Snape, Peter	Wicks, Malcolm
Soley, Clive	Wigley, Dafydd
Spearing, Nigel	Williams, Rt Hon Alan (Sw'n W)
Steel, Rt Hon Sir David	Williams, Alan W (Carmarthen)
Steinberg, Gerry	Wilson, Brian
Stevenson, George	Winnick, David
Stott, Roger	Wise, Audrey
Strang, Dr. Gavin	Worthington, Tony
Straw, Jack	Wray, Jimmy
Taylor, Mrs Ann (Dewsbury)	Wright, Dr Tony
Taylor, Matthew (Truro)	Young, David (Bolton SE)
Tipping, Paddy
Tyler, Paul	Tellers for the Ayes:
Vaz, Keith	Mr. John D. Taylor and
Walker, Rt Hon Sir Harold	Mr. Dennis Turner.
Wardell, Gareth (Gower)

NOES
Ainsworth, Peter (East Surrey)	Coombs, Simon (Swindon)
Aitken, Jonathan	Cope, Rt Hon Sir John
Alexander, Richard	Cormack, Patrick
Alison, Rt Hon Michael (Selby)	Couchman, James
Allason, Rupert (Torbay)	Cran, James
Amess, David	Currie, Mrs Edwina (S D'by'ire)
Ancram, Michael	Curry, David (Skipton & Ripon)
Arbuthnot, James	Davies, Quentin (Stamford)
Arnold, Jacques (Gravesham)	Davis, David (Boothferry)
Arnold, Sir Thomas (Hazel Grv)	Day, Stephen
Ashby, David	Deva, Nirj Joseph
Aspinwall, Jack	Devlin, Tim
Atkinson, David (Bour'mouth E)	Dickens, Geoffrey
Atkinson, Peter (Hexham)	Dorrell, Stephen
Baker, Rt Hon K. (Mole Valley)	Douglas-Hamilton, Lord James
Baker, Nicholas (Dorset North)	Dover, Den
Baldry, Tony	Duncan, Alan
Banks, Matthew (Southport)	Duncan-Smith, Iain
Banks, Robert (Harrogate)	Dunn, Bob
Bates, Michael	Durant, Sir Anthony
Batiste, Spencer	Dykes, Hugh
Bellingham, Henry	Eggar, Tim
Beresford, Sir Paul	Elletson, Harold
Biffen, Rt Hon John	Emery, Rt Hon Sir Peter
Blackburn, Dr John G.	Evans, David (Welwyn Hatfield)
Body, Sir Richard	Evans, Jonathan (Brecon)
Bonsor, Sir Nicholas	Evans, Nigel (Ribble Valley)
Booth, Hartley	Evans, Roger (Monmouth)
Boswell, Tim	Evennett, David
Bottomley, Peter (Eltham)	Faber, David
Bottomley, Rt Hon Virginia	Fabricant, Michael
Bowden, Andrew	Fenner, Dame Peggy
Bowis, John	Field, Barry (Isle of Wight)
Boyson, Rt Hon Sir Rhodes	Fishburn, Dudley
Brandreth, Gyles	Forman, Nigel
Brazier, Julian	Forsyth, Michael (Stirling)
Bright, Graham	Fowler, Rt Hon Sir Norman
Brooke, Rt Hon Peter	Fox, Dr Liam (Woodspring)
Brown, M. (Brigg & Cl'thorpes)	Fox, Sir Marcus (Shipley)
Browning, Mrs. Angela	Freeman, Roger
Bruce, Ian (S Dorset)	French, Douglas
Budgen, Nicholas	Fry, Peter
Burns, Simon	Gale, Roger
Burt, Alistair	Gallie, Phil
Butcher, John	Gardiner, Sir George
Butler, Peter	Garel-Jones, Rt Hon Tristan
Butterfill, John	Garnier, Edward
Carlisle, John (Luton North)	Gill, Christopher
Carlisle, Kenneth (Lincoln)	Gillan, Cheryl
Carrington, Matthew	Goodson-Wickes, Dr Charles
Carttiss, Michael	Gorman, Mrs Teresa
Cash, William	Gorst, John
Channon, Rt Hon Paul	Grant, Sir Anthony (Cambs SW)
Churchill, Mr	Greenway, Harry (Ealing N)
Clappison, James	Griffiths, Peter (Portsmouth, N)
Clifton-Brown, Geoffrey	Grylls, Sir Michael
Coe, Sebastian	Gummer, Rt Hon John Selwyn
Colvin, Michael	Hague, William
Congdon, David	Hamilton, Rt Hon Archie (Epsom)
Conway, Derek	Hamilton, Neil (Tatton)

Hampson, Dr Keith	Nelson, Anthony
Hanley, Jeremy	Neubert, Sir Michael
Hannam, Sir John	Newton, Rt Hon Tony
Hargreaves, Andrew	Nicholls, Patrick
Harris, David	Nicholson, David (Taunton)
Haselhurst, Alan	Nicholson, Emma (Devon West)
Hawkins, Nick	Norris, Steve
Hawksley, Warren	Onslow, Rt Hon Sir Cranley
Hayes, Jerry	Oppenheim, Phillip
Heald, Oliver	Ottaway, Richard
Heathcoat-Amory, David	Page, Richard
Hendry, Charles	Paice, James
Hicks, Robert	Patnick, Irvine
Higgins, Rt Hon Sir Terence L.	Patten, Rt Hon John
Hill, James (Southampton Test)	Pattie, Rt Hon Sir Geoffrey
Horam, John	Pawsey, James
Hordern, Rt Hon Sir Peter	Peacock, Mrs Elizabeth
Howard, Rt Hon Michael	Pickles, Eric
Howarth, Alan (Strat'rd-on-A)	Porter, Barry (Wirral S)
Howell, Rt Hon David (G'dford)	Porter, David (Waveney)
Howell, Ralph (North Norfolk)	Portillo, Rt Hon Michael
Hughes Robert G. (Harrow W)	Powell, William (Corby)
Hunt, Rt Hon David (Wirral W)	Redwood, John
Hunt, Sir John (Ravensbourne)	Renton, Rt Hon Tim
Hunter, Andrew	Richards, Rod
Jack, Michael	Riddick, Graham
Jackson, Robert (Wantage)	Robathan, Andrew
Jenkin, Bernard	Roberts, Rt Hon Sir Wyn
Jessel, Toby	Robertson, Raymond (Ab'd'n S)
Johnson Smith, Sir Geoffrey	Robinson, Mark (Somerton)
Jones, Gwilym (Cardiff N)	Roe, Mrs Marion (Broxbourne)
Jones, Robert B. (W Hertfdshr)	Rowe, Andrew (Mid Kent)
Jopling, Rt Hon Michael	Rumbold, Rt Hon Dame Angela
Kellett-Bowman, Dame Elaine	Ryder, Rt Hon Richard
Key, Robert	Sackville, Tom
King, Rt Hon Tom	Sainsbury, Rt Hon Tim
Kirkhope, Timothy	Scott, Rt Hon Nicholas
Knapman, Roger	Shaw, David (Dover)
Knight, Mrs Angela (Erewash)	Shaw, Sir Giles (Pudsey)
Knight, Greg (Derby N)	Shephard, Rt Hon Gillian
Knox, David	Shepherd, Colin (Hereford)
Kynoch, George (Kincardine)	Shepherd, Richard (Aldridge)
Lait, Mrs Jacqui	Shersby, Michael
Lamont, Rt Hon Norman	Sims, Roger
Lang, Rt Hon Ian	Skeet, Sir Trevor
Legg, Barry	Smith, Sir Dudley (Warwick)
Leigh, Edward	Smith, Tim (Beaconsfield)
Lennox-Boyd, Mark	Soames, Nicholas
Lester, Jim (Broxtowe)	Spencer, Sir Derek
Lidington, David	Spicer, Sir James (W Dorset)
Lilley, Rt Hon Peter	Spicer, Michael (S Worcs)
Lloyd, Peter (Fareham)	Spink, Dr Robert
Lord, Michael	Spring, Richard
Luff, Peter	Sproat, Iain
MacGregor, Rt Hon John	Squire, Robin (Hornchurch)
MacKay, Andrew	Stanley, Rt Hon Sir John
Maclean, David	Steen, Anthony
McLoughlin, Patrick	Stephen, Michael
McNair-Wilson, Sir Patrick	Stern, Michael
Madel, David	Stewart, Allan
Maitland, Lady Olga	Streeter, Gary
Malone, Gerald	Sumberg, David
Mans, Keith	Sweeney, Walter
Marland, Paul	Sykes, John
Marlow, Tony	Tapsell, Sir Peter
Marshall, John (Hendon S)	Taylor, Ian (Esher)
Martin, David (Portsmouth S)	Taylor, John M. (Solihull)
Mates, Michael	Taylor, Sir Teddy (Southend, E)
Mawhinney, Dr Brian	Temple-Morris, Peter
Mellor, Rt Hon David	Thomason, Roy
Merchant, Piers	Thompson, Sir Donald (C'er V)
Milligan, Stephen	Thompson, Patrick (Norwich N)
Mills, Iain	Thornton, Sir Malcolm
Mitchell, Andrew (Gedling)	Thurnham, Peter
Mitchell, Sir David (Hants NW)	Townend, John (Bridlington)
Moate, Sir Roger	Townsend, Cyril D. (Bexl'yh'th)
Monro, Sir Hector	Tracey, Richard
Montgomery, Sir Fergus	Tredinnick, David
Moss, Malcolm	Trend, Michael
Needham, Richard	Trotter, Neville

Twinn, Dr Ian	Widdecombe, Ann
Vaughan, Sir Gerard	Wiggin, Sir Jerry
Viggers, Peter	Wilkinson, John
Waldegrave, Rt Hon William	Willetts, David
Walden, George	Winterton, Mrs Ann (Congleton)
Walker, Bill (N Tayside)	Winterton, Nicholas (Macc'f'ld)
Waller, Gary	Wolfson, Mark
Wardle, Charles (Bexhill)	Wood, Timothy
Waterson, Nigel	Yeo, Tim
Watts, John	Young, Sir George (Acton)
Wells, Bowen
Wheeler, Rt Hon Sir John	Tellers for the Noes:
Whitney, Ray	Mr. David Lightbown and
Whittingdale, John	Mr. Sydney Chapman.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments) and agreed to.

MADAM SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, `That this House recognises with gratitude the efforts and skills over the years of all workers in the defence industries who have ensured that the United Kingdom's security has been maintained with the best of equipment and weapons; notes that the policy of competition for defence orders adopted by Her Majesty's Government has resulted in an efficient United Kingdom defence industry with world-class export performance; condemns the 25 per cent. defence cuts demanded by the Labour Party Conference which would cripple Britain's armed forces and her defence industry; rejects the idea of a Defence Diversification Agency to second-guess business decisions that should more properly be taken by companies; but welcomes the assistance provided by Her Majesty's Government to help regions to adjust more effectively to major industrial change by creating opportunities for new industries, as exemplified by the wide-ranging package of measures announced last week for Tyneside.'.