§ 3.45 p.m.
§ The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne)
My Lords, with your Lordships' permission I should like to repeat a Statement being made in the other place by my right honourable friend the Secretary of State for Defence. The Statement is as follows:
§ "With permission Mr. Deputy Speaker, I should like to make a statement on the future arrangements for the Royal dockyards at Devonport and Rosyth.
§ "The Royal dockyards employ some 20,000 people. Their turnover is £400 million a year. They repair all of our nuclear-powered submarines including the Polaris force and nearly 80 per cent. of our conventional warship fleet.
§ "As the House is aware, there has over the years been a succession of studies and reports on the future of the dockyards. These reports generally agreed that change was essential. But all previous attempts to introduce a changed structure have come to nothing.
§ "This Government believe that it is essential to get full value for money from the defence budget. If we are to achieve this in the dockyards, three main conditions need to be met. First, local managers must have the freedom and authority to manage in a more competitive environment. Secondly, the dockyards as suppliers of services to the fleet must be separated clearly from their customer. Thirdly, their financial and accounting arrangements must reflect normal commercial practice so that the true price of the work can be properly judged.
§ "I am today issuing an open Government document, copies of which I have placed in the Library, and a consultative document to explain to those who work in the dockyards the likely consequences of change. I am not today announcing a decision on the way forward, but I am opening a period of consultation. I hope there will be a wide, constructive and fruitful discussion over the next two or three months. My intention is to announce to the House a clear way forward before the Summer Recess.
§ "The main options for change range from the creation of a trading fund to full-scale privatisation. Although it would be possible to achieve some improvements within the strategy of a trading fund within the public sector, this would not give the enterprise sufficient freedom from Civil Service constraints for it to operate efficiently in a competitive environment.
§ "The options which would provide this freedom are full privatisation or a system of commercial management under which each dockyard, while remaining in Government ownership, would be operated for a period of years by a company chosen by the Government following an open competitive process. Under either of these options the Government would insist that control remained in British hands.
§ "It is the option of commercial management that seems to the Government to be the best way forward since it secures continuing competition, while maintaining control over the national strategic assets involved. It would require legislation. This option, like full privatisation, also offers the prospect of outside work for the dockyards from customers other than the Ministry of Defence. If implemented, we could therefore look forward to a tauter, more flourishing enterprise.
§ "The House will recall the many successful transfers to the private sector from the public sector 711 achieved by this Government. In all these cases the rights of employees have been protected. Similar protection would form part of a move to the private sector should the Government choose that option.
§ "Whatever the new framework for the longer term, there is an inescapable need for adjustments to the workforce in the short-term in order to improve dockyard efficiency.
§ "Management will be discussing the way forward with the unions involved, starting today. The package of efficiency measures they will be looking for may involve job reductions at Devonport of about 15 per cent. and at Rosyth of about 5 per cent.
§ "Natural wastage and voluntary retirement can be expected to achieve most of the reductions sought by management, particularly at Rosyth. Compulsory redundancy will be used only in the last resort.
§ "My department, as would any good employer, will do all that it can to alleviate the effects of the efficiency measures; particularly it will consider how new business and employment opportunities in these areas might be fostered, including work in support of the new dockyard organisation. I intend to ask my honourable friend the Under-Secretary of State for Defence Procurement to take a particular interest in co-ordinating the efforts required in this positive approach.
§ "Mr. Deputy Speaker, these two dockyards have served the Royal Navy and the nation loyally for many generations. I wish to stress that under this Government their long-term future is assured. But in giving this assurance and recognising the significance of the yards to their local economies I must also expect them to be run to proper levels of efficiency. I believe that the House will accept that there is broad agreement that change in the management of the dockyards is needed now.
§ "I hope that all concerned will join constructively in the consultation process to assist the Government in the decisions that need to be taken. Once the difficult but short period of adjustment has been completed there will be considerable opportunities for expansion and enterprise. I will do all I can to bring about these new opportunities."
§ My Lords, that concludes the Statement.
§ Lord Graham of Edmonton
My Lords, the House is grateful to the Minister for repeating the Statement which his ministerial colleague has given in another place. I am bound to say that the Statement sounds to me like a further step by the Government to get out of the business of providing an efficient public defence capability. Efficiency is the key word in this Statement, and later I shall be asking the Minister precisely what is meant by the word "efficiency" in this particular context.
It certainly appears to us that this Statement is yet a further step towards the mania which the Government have in respect of privatising as much as they possibly can of our national assets in public hands. We believe that in this instance it is a further small step along a very dangerous route. Does the Minister not appreciate that besides the taxpayers' interest there is 712 also the national interest? Have the Government learnt nothing from the experience of the Falklands war, when we were reduced to very dangerous levels in terms of having the capacity to respond in the right way at the right time?
A number of questions stem from this Statement. We know that since the defence review of 1981 a number of measures have flowed. One of them is the measure we are discussing today. We are constantly being told that there is pressure in order to make the defence capability and potential of the nation more commercially orientated. Other than from the Government's imperative to reduce costs, will the Minister tell the House where the pressure is coming from to make our defence potential more commercially orientated? Will the Minister spell out the real savings—not the words and the flowery language—which the Government envisage will be made as a result of this particular exercise? The Statement talks in terms of controls over future management. Would the Minister care to tell us the steps which the Government have in mind to ensure that the management of the dockyards in the future will be wholly and absolutely accountable to the Government, so far as strategic matters are concerned?
Will the Minister tell us also what consultations have taken place hitherto with the trade unions concerned? The Minister said, quite fairly, that the document in the Library is a consultation document. May we have it understood that all options are up for grabs, or is the Minister really saying, "We have decided precisely what we want to do, and we now want the trade unions to collaborate with us in bringing it about"?
The Statement refers to successful previous transfers out of the public sector and into the private sector and to the fact that the rights of trade unions and of trade unionists have been protected. The Minister must be aware that in the past 12 months there has been a trauma at the Royal Ordnance factories. Although at the end of the day there was more satisfaction than there was at the beginning, the Minister must know this was due to enormous pressure, agitation and determination on the part of the workforce at that particular time.
I should like the Minister to tell the House whether the trade unions concerned will be involved more meaningfully in protecting the rights of the workers in the dockyards at the beginning of this exercise than was the case with the ordnance factories. I hope that the Minister and his colleagues have learnt something from that experience.
Can the Minister say anything about the immediate redundancies envisaged in the Statement? It states:The package of efficiency measures they will be looking for may involve job reductions at Devonport of about 15 per cent. and at Rosyth of about 5 per cent".Did the Minister read the item in the Guardian last week which suggested that there could be anything up to 2,000 or 3,000 immediate redundancies arising from the 15 per cent. and 5 per cent. reductions mentioned in the Statement?
The Minister must be aware that there is growing abroad the belief that the Government are concerned not with the best and most secure but with the 713 cheapest solution that is on offer. We had evidence of that in respect of the RAF trainer aircraft, and we have seen it in many other ways. Can the Minister satisfy us that there is a break-even point beyond which even this Government are not prepared to go if an element of security is involved?
What consultations have taken place with the Ministry of Defence police federation? They must be concerned if there is a change, not only in the calibre but also in the nature of the management. As far as we are concerned, a Labour Government would not be in the business of privatising and selling off our defence industry, or of weakening our defence capability. Sadly, the Government's measures smack all too often of saving money at any cost. In our view, the cost is high and will prove to be a false economy.
§ 3.58 p.m.
§ Lord Mayhew
My Lords, is the noble Lord the Minister aware that there would be a wide welcome for effective measures to secure economies in the Royal dockyards? We shall be looking very carefully at the Minister's proposals from that point of view and asking questions about overtime, demarcation between trades, security, and a number of other matters of that kind.
Would the Minister not also agree that the main duty of the Royal dockyards is to keep the Royal Navy in operational readiness? Throughout the whole Statement there is no sign of any awareness of this supreme duty of the Royal dockyards. There is no mention of the subsequent relationship between the dockyards and the navy. There is only this mention in the Statement:The dockyards as suppliers of services to the fleet must be separated clearly from their customer".That is a commercial judgment in commercial language, but if we consider this matter as it ought to be considered, from the operational point of view, it could be powerfully argued that the dockyards must be closely integrated with the Royal Navy. Noble Lords would not expect me to argue this point now, but I shall argue it later.
In the meantime, I ask the Minister this question: why is there no awareness in the Statement of any factor in this problem other than the commercial factor? This is another sign, I am afraid, of the doctrinaire urge to commercialise, to privatise everything, that has marked this Government; and whereas in certain respects my friends and I would accept the need for looking at the Royal dockyards we are going to look very carefully at the proposals at present being put forward by the Government.
§ 4.1 p.m.
§ Lord Trefgarne
My Lords, I shall reply to both noble Lords. I think the noble Lord, Lord Graham of Edmonton, and to a lesser extent the noble Lord, Lord Mayhew, labour under the misapprehension that it is necessary, for the national interest to be served, that these facilities should be in the public sector. I do not for a moment accept that proposition. The fact is that over 90 per cent. or more of Ministry of Defence requirements come from the private sector, and in a time of crisis such as we experienced in 1982 the 714 private sector rises to the occasion just as well as any organisation in the public sector; so I would not accept any proposition which suggests that for the continued maintenance of these facilities they need to remain in the public sector. That is why we have brought forward this range of proposals.
The noble Lord, Lord Mayhew, asked particularly about the need to maintain the efficiency of the fleet at sea. Of course that is a crucial point but, again, it does not require an organisation in the public sector to achieve that. At present the dockyards occupy, I am told, about 10 per cent. of their time on day-to-day running matters rather than long-term refits. It is their primary purpose. Indeed, naval base facilities are generally separate from dockyard facilities, as the noble Lord, Lord Mayhew, will recall from his experience in these matters, and there are base activities which are primarily concerned with maintaining the fleet in current running condition going on at the dockyards separately from the refit arrangements, which are the essence of what we are talking about today.
The relationship between the Ministry of Defence and the operating company, if we decide to go along the commercial management route—and I emphasise that what we are asking for today are views on the various proposals that we bring forward—which the Government have said is the one that they favour, is that of course we would need to pay particular attention to the contracts between the Ministry of Defence and the operator of the dockyard to ensure that the right facilities are available at the right time: for example, to carry out the kind of work that the noble Lord, Lord Mayhew, had in mind.
I cannot over emphasise the fact that we are today embarking upon a process of consultation, which will of course include the trade unions very fully. My right honourable friend the Secretary of State has today written specifically to each and every one of the employees of the dockyards, and for your Lordships' information a copy of the letter is included in the consultative document.
§ Lord Ironside
My Lords, I will, if I may, ask my noble friend two questions which I believe come under the heading of the commercial management option. I think it is true to say that the bidders for operating the dockyards under the management option would be from the major engineering companies in this country which are also supplying the capital needs of the dockyards; and they have great experience of repair and maintenance and that kind of thing in dockyards.
Does my noble friend see that the successful contractor will also be able to supply the capital needs of the dockyard concerned if he is the owner of an operating company under the management option, if this is the way it is to go? Secondly, does my noble friend visualise that the successful operating company under the commercial management option will be able to seek work elsewhere: for example, to be able to undertake work on ships from the Commonwealth navies or even from other overseas navies?
§ Lord Trefgarne
My Lords, perhaps I may answer my noble friend's two points. The first was about the capital needs of the contractor if we go along the 715 commercial management route. I am not quite sure what capital needs my noble friend has in mind, because it would not be proposed, if that were the course to be followed, that the contractor would have to purchase the dockyards. They would remain in Government ownership. On the second point that my noble friend makes—about the possibility of work coming from elsewhere—my answer is, yes: we most certainly do see the dockyards, under such an arrangement as this, being able to seek (and I hope secure) work from other navies to keep the yards going.
§ Lord Ross of Marnock
My Lords, I wonder whether the Minister can tell me if he considers three months' consultation, which is virtually what it is, enough. What are the Government consulting about? Is the Minister consulting with the unions, for instance, as to whether it is to be option A, B or C? Option A is full denationalisation; option B is the trading fund; and option C is private management, though some people call it the franchise option. Or are things going to follow on from there? The Government have obviously already made up their mind that it is option C that they are going to discuss, and they have given us a figure of, I think, 15 per cent. in one of the Royal dockyards and in Rosyth, 5 per cent.
This must surely have been based on some option which the Government already have in their mind. I am not finished yet; far from it. It is all very well to say that there has been a need for change over some years, but only recently we had the experience of the value of these dockyards with the Falklands campaign when praise was there in barrowloads for Rosyth and for the excellence and quality of their output, their turn-out of ships, and the speed with which they did it. It is poor change for them, poor recompense, to be told by a Government that all this has to go and that it has to be handed over to someone inexperienced, though surely experienced in management. We do not know who they are.
There are not many companies in Britain which can take over a dockyard and run it. I wonder what Samuel Pepys is writing tonight in his celestial diary about the present Government in respect of their handling of his dockyards and his navy. This is important for Scotland because the biggest industrial complex in Scotland now is Rosyth with 2,000 employed in the naval base and about 8,000 in the dockyard. I am very glad that there is to be legislation about this. It will go through with much more difficulty—I am glad that the noble Viscount the Leader of the House is here—than the abolition of local government. It will represent a departure from 300 years of tradition in respect of the Royal dockyards. It is wrong to think that we can carry this obsession with privatisation into gambling with the security of the nation.
§ Lord Trefgarne
My Lords, I assure your Lordships that there is no question of gambling with the security of the nation.
§ Lord Trefgarne
My Lords, there is no question of gambling with the security of the nation, as the noble 716 Lord, Lord Ross of Marnock, suggests. We are bringing forward proposals to solve a problem which has been widely recognised for a very long time. As I said in the Statement, difficulties and problems with the dockyards have been evident for many years, including the time when a Government of which the noble Lord opposite was a distinguished member were in power.
We are now bringing forward proposals to deal with this problem. We are inviting views on those proposals from all concerned. We have not brought forward a single proposal; we have brought forward a range of options and we look forward to hearing the views on them. The noble Lord, Lord Ross of Marnock, said there were not many companies in the United Kingdom which would be capable of running a dockyard. Indeed, that may be true. There are not many, but there are some. There are enough, and we look forward to hearing their proposals if that is the route we choose to follow.
§ Lord Graham of Edmonton
My Lords, would the noble Lord the Minister care to say a little more about his confidence that the private sector has been able to supply the needs of the nation in defence procurement? The Minister said more than 90 per cent.—I believe it is 95 per cent.—of our defence needs are supplied by the private route. Does the Minister envisage that as each little fraction of what has been wholly in our hands appears—6 per cent. down to 5 per cent., to 4 per cent., to 3 per cent.—then one day 100 per cent. of our defence procurement needs will be in the private sector? Is that what he is working towards?
§ Lord Trefgarne
My Lords, we have no particular target as to what percentage should be in the public or private sectors. However, I have no difficulty with the proposition that 100 per cent. should be in the private sector.