HL Deb 24 November 1987 vol 490 cc548-53

3.44 p.m.

Viscount Davidson

My Lords, with the leave of the House, I shall now repeat a Statement about the future of British Rail Engineering Ltd., which has been made in another place by my right honourable friend the Secretary of State for Transport.

The Statement is as follows:

"As the House knows, British Rail Engineering Ltd. is one of the main suppliers of railway rolling stock to British Rail. It is also a wholly-owned subsidiary of BR.

"BREL has been extensively reorganised in the last few years. These changes have stemmed largely from the modernisation of BR's locomotive and rolling stock fleets, which has reduced substantially the need for repairs. BREL now consists of four main works—Crewe, York and two at Derby—and concentrates on manufacture and heavy overhaul.

"The Railways Board has now completed its review of options for the future of BREL. Sir Robert Reid has recommended to me that BREL should be offered for sale as soon as possible. I have now given my approval to this. I share the board's view that selling BREL will be in the best interests of the railway and of the BREL workforce.

"The board plans to invite offers for all four main works together as a single business. The aim is to be ready to invite offers by next spring and to complete the sale as soon as possible after that.

"The Railways Board and its merchant bank advisers will be in the lead in developing plans for the sale. My approval will be needed for the eventual sale.

"The board proposes making separate arrangements for the sale of the BREL foundry at Horwich. The aim would be to find a buyer to take it over as a going concern, probably some time next year.

"Great strides have been made by the BREL management and workforce towards commercial viability and competitive levels of productivity. But I believe that the business can best develop and flourish in the private sector. There it will also have much greater freedom to diversify and compete for work outside the railway supply industry and, I hope, to create new employment opportunities.

"Privatising BREL will be good for the railway, good for the railway supply industry and good for BREL itself. I hope therefore that the House will welcome it."

My Lords, that concludes the Statement.

Lord Underhill

My Lords, the only thing that I can say that is satisfactory is to thank the noble Viscount for repeating the Statement. The concluding paragraph that privatisation is: good for the railway, good for the railway supply industry and for BREL itself", and that the Secretary of State hopes that the House will welcome it, is far from the reaction which I and my noble friends behind me have.

At the moment BREL is in a state of confusion. I think the workforce is in a state of dejection. When we look back to 1979 the workforce numbered 36,000. It was envisaged that there would be expansion to 43,000 by the end of 1984. Since then we have had five separate announcements of redundancies. Currently the workforce is down to 10,000 and the last statement means that it will be down to 7,500 by April 1988.

These statements of redundancies have from time to time also been accompanied by the closure of various works, in some cases almost devastating the local communities. Every single announcement of redundancy has been met by a promise that this is for the betterment of BREL and the workforce. That must be far from the truth.

The Serpell Report of 1983 recommended privatisation of BREL and even recommended that British Railways should go to private manufacture. In October 1983 the then Secretary of State, Mr. Nicholas Ridley, instructed BR to examine the possibility of the privatisation of BREL.

We have had reorganisation and, as stated in answer to a Question on 9th November in this House, BREL was not allowed to tender for the sprinter class but only to be treated as a possible major subcontractor.

Why has it been suggested that the Horwich foundry should be kept separate from the sale? It is obvious from the history of events that there has been a deliberate intention eventually to privatise BREL following the Government's dogma and doctrine in this matter, irrespective of the particular industry.

The rundown has meant now that there is land available. Therefore are we to see a period of asset stripping when the sale has taken place? The rundown will also mean that a price can be obtained now for the sale which will be much lower than would have been the case when BREL was a thriving industry and the workforce looking forward to progressive improvement. What will happen to all the first class technical experience that has existed in BREL and also the opportunities for exports which BREL brought to us? This is a disappointing Statement—in fact, a dreadful Statement—which we on this side of the House deeply deplore.

Lord Tordoff

My Lords, the view from these Benches is couched neither in the triumphal terms of the final paragraph of the Statement nor is it the dogmatic response heard from the Labour Front Bench. The attitude that, on the one hand, all privatisation is good is just as foolish as the statement that all privatisation is bad. If noble Lords wish to hear a further development on that subject they might care to listen to the debate to be opened tomorrow by my noble friend Lord Ezra.

With regard to the specific case of BREL, one really is suspicious that the Government are shuffling off their responsibilities. We have a time of enormous over-capacity in the industry. We have national assets being sold off at a time when the stock market is in decline. Can the Government really believe that the price they achieve on the open market is likely to be a fair and reasonable one, or are they simply handing the whole thing over to asset strippers?

There is undoubtedly a lot of real estate involved which must have some significance, but at another time. As the noble Lord, Lord Underhill, said, it might have been much easier to obtain a better price at an earlier time. I suspect that if they were to wait for some time it might be easier to get a better price than if they insist on selling it off now. With business coming from the Channel Tunnel in a few years' time the industry is likely to be in a better position.

One has to consider the people involved in the industry. I do not pretend that in an industry with this sort of over-capacity jobs can be preserved for ever. That is a foolish attitude; in the long term it does not do the industry, the country or employees any good. It seems to me that as in the case of the dockyards, the Government are in danger of shuffling off on to private industry the responsibility for redundancies which may in any case have to take place. Noble Lords will remember that for the dockyards promises were given about jobs but broken six months later by the new owners.

The only other question I ask the noble Lord is whether the Government expect an employee bid for the assets. Will they give favourable consideration to that? It is sad that an organisation such as this, which has contributed so much to engineering in this country, finds itself in the state in which it is today. However, I believe it is foolish to deny that that is the position. I do not believe that dogmatic statements about keeping it in public hands or putting it into private hands will solve the problem. That will only be solved by better management than it has had in the past. If that can be achieved, then there may be some success in the future.

Viscount Davidson

My Lords, I am grateful to the noble Lord, Lord Underhill, for his thanks to me for repeating the Statement and to the noble Lord, Lord Tordoff, for his general and liberal reception of it. The reaction of the noble Lord, Lord Underhill, was not unexpected. I do not believe that the Statement came as a complete surprise to him. It is clear that we shall have to agree to disagree.

Without embarking on a political debate, I should tell the House that BR's main business is running the railway and not running an engineering business. Facilities needed for day-to-day maintenance are already separated into BR Maintenance Limited and will remain in BR control. Privatising BREL will help BR develop fully its policy of competitive tendering and the benefits that that brings to the railway and to its customers. BR's view is that its best interests are served by competition. There will always be problems with this while it tries also to manage an in-house capability.

Much work has been done on restructuring the business. Now there are clear prospects of viability and BREL is confident about its future. The sooner the question of ownership is resolved the better. Private ownership will open up new opportunities for the company.

On the question of redundancies, these have been mainly due to the fall in the repair and maintenance workload as a result of investment in modern rolling stock. Necessary changes have been made irrespective of future ownership. Redundancies have nothing to do with privatisation. BREL hopes to establish alternative employment schemes in the areas affected. It has opened discussions with local authorities and is willing to consider appropriate proposals. BREL has had good success in creating jobs in areas affected by previous job losses.

The noble Lord, Lord Underhill, asked why it is proposed to sell Horwick separately. I understand that Horwick—

Lord Tordoff

My Lords, I think the word the noble Viscount is looking for is Horwich.

Viscount Davidson

My Lords, when I asked at my briefing where Horwich was, I thought it might be halfway between Norwich and Harwich. I completed my briefing and found it to be not far from where the noble Lord, Lord Tordoff, was born. My briefing was successful on that point.

Horwich is a specialist foundry facility. It is outside the mainstream business of rolling stock manufacture and heavy overhaul. BR and its advisers think it can be best marketed separately. People interested in Horwich might well not want to purchase BREL as a whole.

The noble Lord, Lord Tordoff, asked who might buy. Certainly it is open to the staff to seek financial backing for a buy-out if they wish and I hope they will do so; otherwise, the involvement of the workforce would be a matter for the new owners. No doubt the present management will be interested in making offers. I believe that is as far as I can go.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that those of us who listened to the gloomy account by the noble Lord, Lord Underhill, of what has happened to this organisation under public ownership over the past few years were a little surprised to hear his conclusion that it is bad to bring that state of affairs to an end and to give this organisation a new chance.

Is he also aware that experience of the other industries which have been privatised in recent years is an immensely encouraging one and offers an encouraging prospect—

Lord Stoddart of Swindon

Including the Post Office?

Lord Boyd-Carpenter

We have not denationalised the Post Office. The noble Lord opposite thinks we have denationalised the Post Office and in view of the way the Post Office is run at the moment, I must resent that.

Is my noble friend aware that there is an encouraging picture of privatised industries which have grown, flourished and increased the employment they offer? That gives one every reason to hope that the same will be true for this organisation. We wish it the best of luck under its new ownership.

Viscount Davidson

My Lords, I am most grateful to my noble friend. Of course, I agree with everything he said. I do not feel however that it is my job now to anticipate tomorrow's major debate.

Lord Dean of Beswick

My Lords, we are grateful to the Minister for repeating the Statement, and for the information he has given. Is he not aware, however, that some of us believe that such a major decision requires a debate? There are more issues involved than can be fairly dealt with during a Statement? However, I wish the noble Lord, Lord Boyd-Carpenter, would read some copies of Hansard before he starts passing opinions on this type of issue in this House.

The noble Lord began by indicating BREL's lack of success. I should like to quote from the Secretary of State for Transport's reply last week in a debate on this very subject. He said: Since BR began placing new build orders competitively BREL has done very well. It has obtained around 70 per cent. of the orders". I suggest that any company, in competition with other businesses, which is 70 per cent. successful with its tenders had done very well indeed. I believe that is why BREL is being flogged off. I am rather surprised at the sentiments and the way that the Minister dealt with this in another place when he said in the same debate: Earlier I announced the order worth nearly £69 million, for Super Sprinters and I can now say that that order will go to BREL. There are bright prospects for the BR supply industry and for BREL's future within it."—[Official Report, Commons, 17/11/87; col. 939.] I suggest, on the basis of that statement made only seven days ago, that that senior Minister might well be accused by many people of misleading Members in another place when, within a week, he puts forward the proposals contained in the Statement. I speak as an engineer, and I do not find any justification in the Statement for such action. My view is that the action is taken out of political spleen. I cannot see it doing anything for those mainly involved—the rump of the workforce—who have proved that they can cooperate, given the chance to do so. It will mean once again that many more people in those areas will find their way to the dole queues.

Viscount Davidson

My Lords, I said that I did not want to anticipate tomorrow's debate. As this is a Statement, I do not think we should continue the discussion any further.

Lord Stoddart of Swindon

My Lords, I shall speak as a former representative of Swindon. Does the noble Viscount agree that Brunel might have taken issue with his statement that engineering has no place in running a railway? That is what the noble Viscount said. Will he inform the House how the British Rail Board will be able to have the engineering capacity to ensure that its locomotives and rolling stock are satisfactory for its operations?

Viscount Davidson

My Lords, I did not say what the noble Lord thinks I said. I said that BR's main business is running a railway, not running an engineering business. The facilities needed for day-to-day maintenance are already separated into BR (Maintenance) Limited, and will remain in BR control. I think that that answers his question.

Lord Campbell of Croy

My Lords, is my noble friend aware that my wife is the great-great-grandaughter of I. K. Brunel, that engineering certainly brought the railways into existence, but that if he were alive today he would be in space?

Viscount Davidson

My Lords, I note my noble friend's comments.