§ 3.40 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 another place by my right honourable friend the Secretary of State for Defence about Royal Navy frigate orders. The Statement is as follows:
"As the House knows, I have been considering the results of a tendering exercise for two Type 22 frigates for the Royal Navy. Cammell Laird, Swan Hunter and Vosper Thornycroft were each invited to tender for these warships; one, the fourth replacement for warships lost in the South Atlantic, and the other an addition to the naval programme which I authorised in 1983.
460 "The tendering process has been unusually protracted for several reasons. I have been concerned to obtain the best available prices and tauter contract terms than we have been accustomed to in this field of defence procurement. The earlier tender replies did not adequately contribute to this objective, and it was not possible to take a decision on the order before the validity of the tenders expired. A final round of tendering was initiated in late July last year. The results of this round met several of the concerns to which I have referred; and, as with the earlier rounds, showed that the competition had been close and keenly fought.
"The House will be aware that the decision on the orders for these frigates has important implications for each of the competing yards. I have considered these implications carefully in consultation with my ministerial colleagues.
"At this point, I should say that the deplorable and unnecessary industrial action which occurred last summer at Cammell Laird would, as I made clear at the time, had it continued, have excluded the yard from further consideration in the competition. The courage and determination shown by the moderate elements of the workforce at Cammell Laird, in the face of the intimidatory behaviour of their former work colleagues, has averted the almost certain closure of the yard at an early date.
"The cheapest solution from the point of defence procurement would be to place the order for both ships with one yard; but in the light of the wider and relevant factors involved, I have decided that an order for one Type 22 frigate will be placed with Cammell Laird and for the second with Swan Hunter, and I am prepared to authorise the necessary expenditure. This offers the prospect of survival of Cammell Laird as a major warshipbuilder; without such a contract the yard would have closed. I hope that the yard will succeed in obtaining other business in the short as well as the long-term.
"Swan Hunter, which is a much larger firm and is implementing a large redundancy programme at the moment, could face further substantial redundancies even with the order which I have just announced. The Government wish to do what they reasonably can to prevent this. Last autumn, we embarked on the construction of a new class of frigate, the Type 23, and negotiated a first order at Yarrow on the Clyde. I have decided to negotiate an order for the second Type 23 frigate at Swan Hunter as soon as this can sensibly be done, and subject to satisfactory agreement on price and other contract terms. I will expect the price for this frigate to reflect the economies obtainable with an order for two frigates rather than one and to be competitive. In order to establish this, tenders will be invited for the third Type 23 order in the same timescale from all United Kingdom yards capable of carrying out the work."
My Lords, that is the Statement.
§ Lord Graham of Edmonton
My Lords, may I thank the Minister for repeating in this House the Statement which has just been made in the other place. The 461 Minister is aware from Questions which have been tabled by Members of Parliament with constituency interests of the continuing interest in both Houses as to the outcome. From these Benches may I say that in the two yards that will receive the orders it is a satisfactory outcome to what the Minister has said has been a protracted period. The Minister is aware that the considerations of employment are crucial. Although the Minister talks in terms of several reasons, I wonder whether he could tell us the extent to which regard was paid to the consequences of placing the orders in one place or another so far as employment is concerned?
The Minister in the Statement refers to "tauter contract terms". Do I understand that "tauter" is in fact another word for "tighter", and that in actual fact the scrutiny and the need to comply to specifications have been as tightly drawn as possible? Can the Minister tell us whether any corners have been cut in the precise specifications when that has taken place?
I note the strictures which the Minister lays—and I would have said fairly—on the performance at Cammell Laird during 1984. It appears to me that all concerned at Cammell Laird will breath a sigh of relief that they have the opportunity of a reprieve or a new opportunity in the light of what has taken place here. Coming from Tyneside, I certainly welcome the action of the Minister and his colleagues in placing one of the orders with Swan Hunter. Tyneside is an area which is deeply in trouble from unemployment and difficulties in the shipbuilding industry.
Is the Minister able to tell us anything further to the Answer that his Parliamentary colleague, the Under-Secretary in another place, gave to Mr. Dalyell on 11th January (at col. 561 of Hansard) where the Minister then said:
The average cost of a batch 111 type 22 frigate is currently estimated at about £140 millionand that there are other factors, too, making it in excess of 150 million. In a tauter specification and satisfactory terms are we talking about that kind of figure at this particular time?
Would the Minister care to say a little more about the causes for the delay? The Minister lays much of that on the inability to get proper specifications within a budget, and secondly on the conditions in the shipyards. I wonder whether it has anything to do with the escalating costs of the Trident programme and the need for the Minister and his colleagues to try to keep within their overall budgets?
Can the Minister assure the House that in no way will these frigates or any other vessel of a similar ilk suffer from the need of the Government to keep within the overall defence budget despite the escalating costs of Trident and other factors? Finally, may I say that this is perhaps one of the most benign Statements that the Minister will ever have the opportunity of presenting to the House; and so far as we are concerned on this side there is a great deal in it that we welcome. It is a satisfactory Statement.
§ Lord Mayhew
My Lords, is the Minister aware that my noble friends and I will have a more jaundiced view of his Statement than the noble Lord, Lord Graham? Would he say first whether these regrettable delays mean that the Government can only maintain 462 the destroyer and frigate fleet at its promised level of 50 ships by keeping in service frigates which would otherwise have been retired? Will he answer a question about the phrase which refers to ordering "the second Type 23 … as soon as" the Government sensibly can? Does this mean that they will not order the second Type 23 frigate until after the normal period of testing of the first Type 23, the first of its class? Will he say in which years the second and third Type 23 will be ordered? Finally will the noble Lord tell us what progress the Government have made in their discussions for a standard NATO frigate design for the mid-1990s?
§ Lord Trefgarne
My Lords, I am grateful to both noble Lords. As for the questions put to me by the noble Lord, Lord Graham, I can tell him that the social considerations—if I may call them that—while not paramount, certainly loomed pretty large in our considerations of this particular contract, or these two contracts as they now are. I can confirm that we have certainly cut no corners in reaching the specification and the contractual terms of these two ships. That would certainly be a reprehensible action to take and we of course would have none of that.
As for price, the figure that the noble Lord offered of about £140 million is in the right ball park. I can confirm that. The noble Lord will know that we do not go into detail on the prices, but I can see no harm in confirming the approximate figure which he has put to me. I can confirm to the noble Lord that these contracts have no relevance to the Trident project to which he referred. That is a quite separate matter. Proper budgetary provision will be made for both these contracts and for the Trident programme.
In answer to the noble Lord, Lord Mayhew, I can tell him that we plan to place the order for the second and third Type 23 frigates about the beginning of next year: that will be before the first Type 23 frigate comes into service. That was ordered in October last year so we shall not have the benefit of the trials programme when we place the order. However, to have to wait all that length of time would put the date upon which we placed the order for the second and third Type 23s some further distance into the future. We would be very reluctant to do that. Those were the principal points put to me by noble Lords.
§ Lord Boyd-Carpenter
My Lords, in view of the delays that have taken place in the delivery of previous ships, can my noble friend say whether the tauter contract terms to which he referred include stiff penalties for failure to deliver to date? Secondly, can he tell the House what was the saving forgone—in my view, rightly—by placing the orders for the two Type 23 ships in different yards?
§ Lord Trefgarne
My Lords, my noble friend puts his finger on the principal point that we have sought to correct in seeking the so-called tauter terms in our contractual arrangements: that is, to get punctual delivery at the time, at the price and to the specification stipulated in the contract. There is a small sum involved in going to two separate yards rather than in placing the order for both ships at one yard. Perhaps my noble friend will allow me to write to him with the figure.
§ Lord Sefton of Garston
My Lords, may I add my thanks to those expressed by my noble friend on the Front Bench to the Minister for repeating the Statement which has been made in another place? More particularly, I thank the Minister for the fact that Cammell Laird will obtain one of these orders. This is not the time to debate the worthwhileness of giving Cammell Laird an order for a frigate. However, taken against the background of the problems that Merseyside has had, it is not surprising that occasionally there is industrial trouble there. An objective study of the industrial troubles on Merseyside by any fair minded person would show that it is not the only place which has industrial problems. Compared with some other places in the country, including the South-East, the record is pretty good. Having said that, it would be churlish, as a Merseysider, not to express my gratitude, which I am sure is echoed all over Merseyside today, for the placing of the order there. I am sure that the tribute paid by the Minister to the moderate element in Merseyside will be well justified and that Merseyside will return a good job on time.
§ Lord Trefgarne
My Lords, I am grateful to the noble Lord for that intervention. The efforts of the moderate elements in the workforce at Cammell Laird have indeed resulted in the placing of this order.
§ Lord Mayhew
My Lords, will the noble Lord answer the first question that I asked and reassure the House that these delays will not mean any threat to the Government's pledged fleet of 50 destroyers and frigates? Will he agree that this will not be maintained simply by keeping on ships that otherwise should retire from service?
§ Lord Trefgarne
My Lords, I can confirm that it remains the Government's policy to provide a fleet of about 50 destroyers and frigates, as the noble Lord knows. The orders that we have announced today, which we have foreshadowed for next year, will contribute to that fleet, and there will be more frigates and destroyers ordered in the future.
§ Lord Roberthall
My Lords, I wish to ask the Minister just one question. In view of the competition involved, am I right in thinking that these are contracts which will not be subject to reference to the review board on Government contracts?