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§ Mr. David Martin (Portsmouth, South)I am most grateful to Madam Speaker for granting me a timely opportunity to mention the fleet maintenance and repair organisation, the future of which vitally affects, not only my constituents, but those of my hon. Friends and neighbours, whose strong and assured support I thoroughly welcome.
The latest review into the planned market test of the FMRO plainly threatens its continued existence in carrying out docking and essential defects requirements, as well as being responsible for organising a great deal of unscheduled work on ships.
§ Mr. Peter Griffiths (Portsmouth, North)I realise that my hon. Friend has only a short time. I interrupt him only to pick up the argument that he made to start with, which was that we are debating not a narrow issue, but one that widely affects the whole Portsmouth travel-to-work area and the economy of southern Hampshire. Only a firm assurance that the FMRO will continue as a single unit with a solid work load will remove the threat to the necessary morale of the economy in that part of the country, extending much wider than the constituencies in Portsmouth.
§ Mr. MartinI am most grateful to my hon. Friend for making those valuable points, which I am sure will be considered by my hon. Friend the Minister.
I concede at once that it is necessary always to consider whether public money is being spent properly or should be spent at all. That is the case with every Government Department, and the current public expenditure round is no exception.
In defence, the priority is, rightly, to spend for the maximum benefit of the front line, but it is my main purpose in this debate to show that the front line—in this case front-line surface ships of the Royal Navy and the people who serve in them—is indeed best served if the finest Royal Navy ship repair facility, the FMRO, is allowed to continue its work, made even better by the market-testing operation to which Ministers and Royal Navy personnel are already signed up, and which, unlike the position at Devonport, is attracting very healthy commercial interest from some very hard-headed business men.
In making such claims, I do not rely on the proud traditions and sentiments stirred by 500 years of Portsmouth dockyard's unparalleled contribution to shipbuilding, refitting and repair, although, as a Conservative, such considerations weigh with me, as I am sure that they do with my hon. Friend the Minister.
Today, I rely wholly and only on the present-day facts. The more that those facts are considered dispassionately on public expenditure grounds as well as grounds of front-line operational efficiency and effectiveness, including the well-being of sailors and their families, the more rational minds are driven to the conclusion that it would be madness to interfere with the present planned arrangements for the FMRO, and plain common sense to give it the opportunity that it deserves to serve the fleet on the new basis envisaged.
What are the powerful arguments for keeping a facility for maintenance and repair work at Portsmouth? First, plainly the review of the market-testing operation is being 626 offered up as a cost-saving measure, probably also in an attempt to help the faltering privatisation plans and the position at Devonport. However, far from public money being saved, I have heard a reliable prediction that, if all the effects of messing about with the successes of Portsmouth to transplant elsewhere are taken into account, the cost would be at least £200 million.
Secondly, 58 per cent. of the surface fleet—42 ships, including the three carriers—is based in Portsmouth. The cycle of ships at sea these days places greater pressure on their operational capacity, requiring speedy access to an efficient and flexibly run repair and maintenance facility between refits.
A good example is the carriers, one of which, Invincible, soon to be replaced by Illustrious, is required to be on station in the Adriatic because of the continuing unstable position in Bosnia and the former Yugoslavia. That requirement shows no sign of ending while front-line British troops are involved in that theatre, whether helping to keep the peace or implementing any peace settlement.
Although programmed ship projects comprise only 4.25 per cent. of the total naval ship repair programme, they are essential to operational effectiveness and availability of Portsmouth ships. Overhead costs are shared with maintenance of the operational base. It would, for instance, be potty to separate the utilities from the market-testing process. Any transfer of work elsewhere is therefore highly questionable in savings terms. Transferring DEDs work to Devonport would not make a significant impact on the position in Devonport, but it would mean everything to Portsmouth.
Thirdly, if more than half the surface ships are based in Portsmouth, it would be nonsense not to have facilities for their repair and maintenance on hand. If the facilities were to be removed elsewhere, base porting would probably follow, and the finest docking provision in Europe would be run down. As my hon. Friend the Minister is aware, base porting is a vital part of the harmony rules for sailors serving on board, who are entitled to a certain number of weeks each year in their base port.
Many years have been spent and consistent policy decisions made, concentrating not only on ships but on administrative headquarters and training establishments for the Royal Navy in and around Portsmouth, not for the fun of it but because greater consideration for home and family life, for summer leave, school holidays, Christmas and so on is very much part of recruiting for, retaining in and running a modern Royal Navy. That should also be an important consideration for a modern Conservative Government. Any proposal that claims to make questionable financial savings while running counter to harmony rules should be rejected.
Fourthly, I shall discuss the likely commercial outcome of continuing with present plans for market testing, assuming that it is followed by a desperately needed long period of stability, at least seeing through the first few contracts under the new arrangements before any further review is even considered, let alone announced. In that context, the prime consideration is repair facilities for the Royal Navy.
Even granting that at present there is a national overcapacity of ship repair facilities—which I believe these days is debatable—instead of taking the negative "let's shut something down" line, let us admit that nowhere in Europe has greater potential to develop a 627 ship docking and repair business on a sound international commercial basis, harnessing private sector companies and resulting in the cheapest possible service for repairing and maintaining ships of the Royal Navy, than Portsmouth dockyard. We can find evidence for that, not only in the private sector companies so keen to join the tendering process at Portsmouth, but in the lack of commercial investment in new ships in recent years, making more repairs needed, or likely to be needed, for those that are in use. In addition, all ferries are likely to need docking and repair facilities as new safety standards require reconstruction work. Is that to be done at Cherbourg rather than Portsmouth because we have not the nous or the nerve to compete in the market—under a Conservative Government, no less? With such opportunities, we would be mad to break up such a successful going concern as the FMRO, and for what?—to leave the docks to silent decay.
Speaking about a going concern, it is wholly relevant to the commercial potential of the FMRO to continue service to the Royal Navy, and wholly relevant to that consideration are the present Portsmouth work force, now numbering 1,450 people. I cannot speak highly enough of the massive co-operation of the trade unions and the whole work force in recent times in adjusting to new, flexible working and training arrangements, improvements in productivity and efficiency, co-operation with contractors, and mixed skills working, which has shown a dedication to meet the challenge of the market-test operation every bit as impressive as the examples that used to come out of Japan alone. Management and those on the shop floor have united in their determination in a way that even a casual visitor to the FMRO can feel in the air. That feeling is even more pronounced when one has the privilege of being shown round the facilities by a human dynamo such as Mr. Keith Crockford. One of the greatest disadvantages of the review of the market test process is that, as well as the risk of commercial bidders cooling off, the enthusiasm, energy and high morale of the FMRO staff may be undermined.
I am not exaggerating when I say that the staff believe, however wrongly, that the review will result in the closure of the FMRO. In that case, all the enthusiasm, energy, co-operation and the current reorganisation of buildings and workshops will have been for nothing. That must not be allowed to happen—it would be madness to allow it. Before any more harm is done, the decision must be taken—the sooner, the better. The damaging limbo must not last a day longer than necessary.
When I visited the FMRO last Friday, Captain John Crump, its chief executive, gave me an FMRO shield. Much as I treasure it, I am sure that he will give me another one if I pass mine to my hon. Friend the Minister on condition that he keeps it on his desk until a decision is quickly reached. As an additional reminder, I can tell my hon. Friend that the Greek historian Herodotus, with whom I am sure my hon. Friend is familiar, tells us that after the Athenians had embarrassed the Persian emperor Darius at Sardis, he commanded a slave to repeat to him three times at dinner each day, "Remember the Athenians." Over the coming days, until a decision is reached, I ask my hon. Friend to ask a civil servant to repeat to him three times each day while he tackles his health food snack, "Remember the FMRO."
§ The Minister of State for the Armed Forces (Mr. Nicholas Soames)I am grateful to my hon. Friend the Member for Portsmouth, South (Mr. Martin) and start by congratulating him on his success in securing today's debate on a subject in which he has taken a close personal interest over many years. I am delighted to see that my hon. Friend the Member for Portsmouth, North (Mr. Griffiths) is also in the Chamber.
My hon. Friend the Member for Portsmouth, South has been an assiduous champion of the interests of Portsmouth naval base. I wish to commend him for the way in which he so vigorously fights for his constituents' interests. I also join him in expressing my admiration for the FMRO, whose reputation is excellent. I was talking this morning to a captain who had commanded a ship that had been looked after by the FMRO. He spoke warmly and highly of the quality, speed and commitment of its work. I join my hon. Friend in paying tribute to the work force, to the way in which they throw themselves into their tasks so vigorously and to the excellence of the product.
I also pay tribute to the excellent service provided to the fleet by the FMRO, and shall respond as fully as I can to the understandable concerns over the organisation's future. Those concerns have arisen following my recent announcement that we are considering whether the current market-test route remains the most appropriate course of action in the current financial and operational circumstances. As my hon. Friend rightly said, the amount that we spend on defence and the way in which we spend it is a matter of continuing review. We have to undertake a broad range of tasks and we must get everything we can out of our limited and limiting funds. I hope that I shall be able to allay some of my hon. Friend's anxieties, although I cannot promise to do so.
The FMRO is a comparatively new institution, which was opened in 1984. It has a long and proud list of antecedents stretching back to the dawn of time. In 1495, King Henry VII ordered the construction of the world's first dry dock at Portsmouth. From that auspicious beginning, there developed over the centuries the infrastructural inheritance and the skills that characterise the naval base today.
In its heyday in the late 19th century, Portsmouth dockyard, as it was then known, more than doubled its capacity through a major expansion programme. It combined ship building and ship repair with a large range of ancillary activities. As my hon. Friend knows, the dockyard, and the city, saw the most distinguished service through both world wars, but the changing nature of the Royal Navy required progressive changes in its engineering support and maintenance facilities. In response to those changing imperatives, Portsmouth dockyard ceased to build warships in the late 1960s—HMS Andromeda was the last ship built there. In October 1984, following decisions taken in the 1981 defence review, and after a period in which it gave fantastic support to the Falklands task force, the dockyard was closed.
The fleet maintenance and repair organisation was conceived as a conscious attempt to redirect naval support resources to best effect in an era of considerable financial stringency. If there were a climate of financial stringency then, the pressures today are, proportionally, even greater.
629 Our priorities have not changed much since then. The FMRO was not supposed to be a scaled-down version of what had gone before. As the FMRO evolved, it enabled a major shift in emphasis that saw it taking a far greater role in supporting the active, operational fleet rather than devoting resources to ship repair work on non-operational ships.
As a consequence of the change in emphasis, ship refit work by the FMRO ceased in 1992. Since then, the organisation has specialised in providing a flexible and responsive service to operational ships through maintenance work on vessels base-ported at Portsmouth and to visiting ships. The work undertaken ranges from programmed dockings and essential defect work, which involves ships spending several weeks in dry dock, to minor engineering support. The FMRO plays an important role in allowing the crews of vessels based at Portsmouth to spend time with their families during those maintenance periods—something that would not be so easy to arrange were the work carried out elsewhere.
§ Mr. Peter GriffithsI apologise to my hon. Friend for intervening. Can he assure me that the decision on the FMRO will be taken on its merits, not in the shadow of the problems at Devonport, which may be pushing the Ministry of Defence and the Minister towards a decision that they may not wish to take?
§ Mr. SoamesI am delighted that my hon. Friend made that intervention and I can assure him that what he suggests is not the case. The case for the operation is based solely on trying to obtain the best result. I endorse what my hon. Friend the Member for Portsmouth, South said about the importance of the harmony rules and how well they work for the 58 per cent. of the surface fleet based at Portsmouth. The rules are extremely important to the crews and those involved with them—they are allowed a degree of flexibility that other, less fortunate, people are unable to enjoy. The FMRO also provides a centre for supplying base services and utilities to the rest of the naval base, and I again join my hon. Friend in paying tribute to its admirable work.
The decision to market-test the FMRO was confirmed during the "Front Line First" study last year, and in July 1994 the formal preparations commenced. "Front Line First" confirmed that market testing was the best way of seeking efficiencies within the organisation, focusing resources on its key tasks and identifying alternative uses for any surplus infrastructure—for example, my hon. Friend mentioned more commercial utilisation of the docks. Nothing has occurred since that time to alter that judgment, and the current review will not go back to examine alternative management options, such as in-house operation or agency status. There is no basis to suggest that that would be worth while.
In the 18 months since the decision to market-test the FMRO was taken, we have seen the implementation of the "Front Line First" measures, several of which related specifically to naval infrastructure. There have also been developments in our drive to privatise the royal dockyards and in the associated programme of surface ship and submarine refits. All of those factors have implications for the future operation of the FMRO.
There has also been continuing pressure on the support area to generate the efficiencies that are needed to maintain front-line capability and to enable the MOD to live within 630 its means—which is not as easy as my hon. Friend might think. Therefore, it is only proper to review programmes such as the FMRO market test to confirm that, despite the changes that have taken place since they commenced, they remain the most appropriate and cost-effective solution. I make no apology for that, although I understand the concern that has arisen out of the uncertainty.
It is also correct for such a review to be conducted before third parties have committed significant resources to responding to the market test. That is why I have announced the review before issuing the invitation to tender: a stage which companies could reasonably assume marks the start of the formal market-test process.
It would certainly be wrong to encourage companies to invest resources at this stage while there remains a possibility of not proceeding with the market test. We would be rightly criticised if we were to do that. Therefore, we are now seeking to take a view on the Navy's future support requirements at Portsmouth and examine, against the background of our existing repair and maintenance facilities, whether we are better served by proceeding with the market test of the FMRO as it currently stands or whether alternative options would offer a more cost-effective, but still operationally acceptable, solution. Those alternatives would need to take account of the whole range of existing ship repair facilities, including the royal dockyards and the wider functions of Portsmouth naval base.
As to my hon. Friend's point about the dockyards' sale, the Government remain committed to privatisation at the right price. Considerable benefits and efficiencies have emerged in the years since the dockyards' management was contracted out to the private sector, and I fully expect that to continue under privatisation. We require both dockyards to provide longer-term competition and value for money within the refit programme. The FMRO does not carry out refit work. That may change if a private sector operator wished to bid for such work, but it would not alter our policy in respect of the two dockyards.
Efficiencies within the dockyards are not an alternative to efficiencies within the FMRO: both are needed. Dockyard efficiencies are already being addressed within the sale process. It is hoped that the review of the FMRO will generate its own savings. As I have said, any alternatives would need to take account of the whole range of existing ship repair facilities and existing capacity—including the royal dockyards and the wider functions of the Portsmouth naval base.
I assure my hon. Friend—who is entitled to such an assurance—that the FMRO will be examined not in isolation, but within a coherent context which embraces the naval base as a whole entity. Work is at an early stage and I can give no indication of how it might develop, but I am of course extremely conscious of the real anxiety caused to the work force and to the wider community and, as I told my hon. Friend, I do not wish to extend it one moment longer than absolutely necessary. I certainly hope to reach a decision early next year.
My hon. Friend wants to know what options we are examining. It will be clear from my general description of the factors involved in the review that one of the routes we are exploring is whether we can reduce the current overcapacity in our ship repair facilities. "Front Line First" made some inroads into the surplus capacity that exists within naval bases, but there is still some way to go to complete that process of rationalisation.
631 Ship repair facilities remain an area where some surplus capacity exists. That is being tackled within the Government's programme of dockyard privatisation and clearly must similarly inform the review of the FMRO market test. Therefore, I cannot rule out future reductions in the tasks carried out at the FMRO should their absorption elsewhere represent a more economical use of resources.
Equally however, it is pure speculation to claim that the FMRO will close as a result of the review. I can say categorically that we will not seek to introduce measures affecting the FMRO that would impact adversely on the operations of the front-line ships. My hon. Friend is fully aware—as am I—of the great benefits that the FMRO brings to that operation and that stands it in very good stead.
The whole point of the exercise is to avoid that outcome at all costs. I reassure my hon. Friend that the review will take account of the fleet's needs and those of the ships' crews as well as the demands of the Department as a whole. That is why I give an undertaking today that it will be examined in a coherent and sensible manner in the round rather than in isolation.
I should also stress that one wholly possible outcome is to continue with the market test. For that very reason, we have taken pains to maintain the process of preparing the invitation to tender in order to minimise any delay to the overall market-test timetable should the review confirm the validity of proceeding with it. I am satisfied that our dialogue with interested private sector companies will not suffer unduly during that period of uncertainty. They fully understand the pressures that have led to the situation.
I have heard claims that the review of the FMRO is designed to displace ship repair work from Portsmouth so that it can be given to the royal dockyards to bolster the Government's privatisation programme, as my hon. Friend suggests. I have also seen media speculation that the review now under way is part of a concerted effort to undermine the naval presence at Portsmouth. I would like to take this opportunity to dispel those rumours as totally unfounded.
Taking the claims in turn, the sale of the royal dockyards is proceeding as an entirely separate matter. Negotiations with the companies currently managing both yards are not assuming that any work whatsoever will transfer from the FMRO to either Rosyth or Devonport. It is equally absurd to conclude that the review of the FMRO heralds the beginning of the end for the naval 632 base. I recognise local concern about the recent decision which I announced during the defence debate last month to base HMS Ocean and the future amphibious ships at Devonport rather than at Portsmouth. However, I assure my hon. Friend that there is no connection between that decision and the review of the FMRO market test. The review has no remit to address current base-porting arrangements.
The fact is that Portsmouth is currently home to some 58 per cent. of the surface fleet of the Royal Navy—we need no further evidence of the Royal Navy's complete commitment to, and dependence on, Portsmouth as a key operational and support centre. I have also heard suggestions that, rather than review the FMRO, the Government should look again at the royal dockyards to seek efficiencies there. That task is already in hand within the context of the dockyard privatisation programme.
The Government's policy on ship refits is quite clear and requires both dockyards to provide effective competition and value for money into the future. The process of dockyard sale will prove to be the mechanism for delivering efficiencies within the dockyards and reducing costs to the MOD.
In summary, I make it clear that, in deciding whether to market-test the FMRO, we will take full account of the factors raised by both of my hon. Friends today. We will not adopt solutions which, while pleasing on cost grounds, fail to meet the operational needs of the Royal Navy. The FMRO currently delivers a first-class service in a thoroughly effective manner.
I cannot, however, dispel fears that the facilities and functions currently carried out by the FMRO might be affected by the review. I hope that, by setting them in the context of the financial and operational imperatives that obtain, I have at least allayed the worst suspicions and made it clear that our minds are truly and genuinely open.
There is certainly no hidden agenda or preconceived view that the market test should not proceed. As my hon. Friend rightly said, it behoves us to be prudent in committing the Department to courses of action which may not represent best value for money. That is the sole rationale behind the review.
I have listened carefully to my hon. Friend and undertake to keep him closely in touch with developments. Once again, I warmly congratulate him on securing a debate on an important asset not only to the Royal Navy, but clearly to Portsmouth and the wider community. I congratulate those who work in the FMRO. I am extremely grateful to them and I congratulate my hon. Friend on raising the matter.