Ordnance Factories and Shipyards: Privatisation (Hansard, 26 February 1985)

§ Lord Davies of Leek
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne)
My Lords, we expect to introduce private capital into Royal Ordnance plc as soon as it makes sound commercial sense to do so, but it is too early in the life of the company to determinate a date. British Shipbuilders have been asked to make substantial progress towards privatisation of their warship building yards by 31st March 1985, and to complete it by 31st March 1986.

§ Lord Davies of Leek
My Lords, I thank the noble Lord for his usual talented Answer. I should like to ask him, first, whether the British Docks Board is to be included. Secondly, is the noble Lord aware that what really is happening under this massive move towards privatisation is that hard-nosed Toryism is now growing repugnant to the old traditional British Tory Party?

§ Lord Trefgarne
My Lords, the British Docks Board, to which the noble Lord referred, is not part of the arrangements to which I have been referring. The noble Lord will not be surprised to hear that I disagree profoundly with the observation in the second part of his supplementary question.

§ Lord Shinwell
My Lords, is the noble Lord the Minister aware that one of the firms likely to be affected by this possibly substantial change in management and organisation is the firm of Yarrow's, on the Clyde? Is he aware that this firm has been engaged for a long time in building warships, not only for the British Navy but for other navies? There have never been any restrictive practices in operation there, and very rarely has there been an industrial dispute. Why make any change at all? Why not leave it to proceed as it has been doing for many long years, to the satisfaction of the country and the British Navy?

§ Lord Trefgarne
My Lords, again, I am afraid, I do not wholly agree with the noble Lord. I believe that when Yarrow's and the other companies come into private ownership they will be much better placed to compete in world markets than they have been recently in public ownership; and I look forward very much to that.

§ Lord Taylor of Gryfe
My Lords, may I ask the Minister whether it is the case that the disposal of British Shipbuilders is now open to competitive bids? Will the Minister accept that it is common commercial practice, when assets are exposed for competitive tender, for a reserve price to be placed on the assets? In this case, will the Minister observe the same commercial practice on the disposal of this national asset?

§ Lord Trefgarne
My Lords, it is British Shipbuilders specifically who are seeking bids for the companies concerned. The noble Lord will be aware that they have asked for bids for Yarrow's, Brooke Marine and Hall Russell, and it is for them to determine the detail of the arrangements that they are now putting in hand. I do not think I can go further than that.

§ Lord Dean of Beswick
My Lords, may I ask the Minister whether he is satisfied that, when these proposals have borne fruit, the needs of the armed forces—the army and the navy—will be met by the resulting companies in an emergency situation, bearing in mind the sort of situation the Government are now creating, where profit and not need is the prime motive?

§ Lord Trefgarne
My Lords, I am indeed satisfied that the future arrangements will prove satisfactory. It is perhaps worth remembering that 90 per cent. or more of our defence requirements have always been provided from the private sector.

Lord Winstanley
My Lords, as a former medical officer at one of these establishments, may I ask the noble Lord whether he is now satisfied, or perhaps whether the employees are now satisfied, with the employment and pensions arrangements for staff in these establishments? Are there at the moment any unresolved disputes upon which discussions are continuing?

§ Lord Trefgarne
My Lords, I think the noble Lord is referring to the Royal Ordnance factories. In regard to the terms governing the transfer, final agreement with the trades unions has still to be reached on the pensions scheme for transferred staff. Discussions are continuing on the basis of Government proposals, and I hope that these will be concluded soon.

§ Lord Graham of Edmonton
My Lords, is the Minister able to tell the House something about the security arrangements at Ordnance factories in the event of the substantial changes that were presaged in the earlier part of his original Answer? Is the Minister able to assure us that full and fruitful discussions are taking place with the Ministry of Defence Police Federation in respect of adequate staffing at Ordnance factories? Will the Minister give us an assurance that there will be sufficient police in place, and that we shall not have a situation where some are taken from one factory in order to ensure that another factory is up to standard, thus leaving the first factory undermanned?

§ Lord Trefgarne
My Lords, with respect I fancy that that question goes a little wide of the Question on the Order Paper. Nonetheless, I can assure the noble Lord that whatever arrangements are appropriate will be made.

§ Lord Shinwell
My Lords, arising out of my supplementary question, is the Minister aware that his reference to the prospects for the Yarrow Shipbuilding Yard is based upon an assumption that things will be better under privatisation? I point out that that is just an assumption. I am dealing with facts and the Government should do the same. Yarrow's is one of 834 the best firms in the country, and indeed one of the best warship building firms in the whole world. Why interfere with it? Why not let it go on in the same way? Why base the change merely on an assumption that things will be better?

§ Lord Trefgarne
My Lords, the noble Lord has asked me to refer to facts. I am afraid that the facts are that Yarrow's and the other British warship building yards have not been particularly successful in world markets recently. I hope that their transfer into the private sector will change that situation.

Lord Bruce of Donington
My Lords, is it not true that Her Majesty's Government have not so far been able to produce any convincing and detailed reasons as to why the warship yards should be privatised? Is the noble Lord further aware that the Government have still to prove the substantive point that a mere change in ownership results in any greater degree of efficiency? Is it not also true that the real reason why Her Majesty's Government wish to privatise the warship yards is that they know perfectly well that profitablility rests very largely upon cost-plus calculations for the purposes of determining their profit—this has been admitted in open debate—and that what it really amounts to is that they are handing over a plum to their political friends?

§ Lord Trefgarne
My Lords, I am afraid that I view these matters from a diametrically opposite point of view to that of the noble Lord. The noble Lord says that no argument has been advanced as to why these firms should be returned to the private sector. I say that there was no single argument why they should have left the private sector in the first place. They should now be returned.

Lord Campbell of Croy
My Lords, is my noble friend aware that in the case of Yarrow's, which was referred to by the noble Lord, Lord Shinwell, most of its long history of success took place during the years when it was in private hands, before 1977?

§ Lord Trefgarne
My Lords, I am indeed aware of that fact. That was why I was obliged to remind the noble Lord, Lord Shinwell, that that firm and the others have not been particularly successful in international markets in recent times.