HL Deb 14 June 1991 vol 529 cc1287-314

11.42 a.m.

The Parliamentary Under-Secretary of State, Ministry of Defence (The Earl of Arran)

My Lords, I beg to move that this Bill be now read a second time.

The Atomic Weapons Establishment (AWE) is this country's only source of nuclear weapons. It is responsible not only for research and development, but also for the production of these weapons, for maintaining them, and ultimately for dismantling them. AWE is based at four sites—Aldermaston, Burghfield, Cardiff and Foulness—and employs several thousand civil servants, who are mostly industrial personnel, scientists and engineers. The majority of these are employed at Aldermaston, although several hundred work at each of the other three sites.

AWE has developed, and is currently producing, the nuclear warheads which will be deployed in the Trident system which is due to enter service in the mid-1990s. I should add that it is only the nuclear weapons which are the responsibility of AWE. It does not deal with delivery systems; in this case, the Trident D5 missile which is being bought from the United States. The submarines, which in turn will carry the missiles, are being built in the Vickers' shipyard at Barrow.

The Trident warhead programme is making considerable demands of AWE. The establishment has done well so far and we expect it to achieve the initial production of nuclear warheads to meet the in-service date of the mid-1990s for the first Trident submarine. However, the later stages of the Trident programme require a much faster rate of production. AWE's ability to meet this increasing challenge has been hampered by difficulties in recruiting and retaining staff in the highly competitive Thames Valley area, led by a shortage of production management expertise.

Against that background the Government looked carefully at the question of how AWE should be managed, not only in order to resolve the current problems but also to secure a sound and efficient future for the establishment and to preserve its exemplary safety record and its excellence as a research establishment.

Our conclusion was that the best solution was for the operation of AWE to be transferred to a private sector contractor. In any other field a complex industrial enterprise such as AWE, including a major production operation, would be carried out in the private sector. The industrial management expertise which AWE needs is readily available in the private sector and a private sector contractor would have greater flexibility to offer the terms and conditions of service necessary to deal with AWE's recruitment and retention difficulties.

We do not intend, however, to sell off the AWE sites or the vital facilities which they contain. It is important that my right honourable friend the Secretary of State for Defence should remain ultimately responsible for the establishment and that in the last resort it should always be possible for him to take back direct responsibility for operating it. Therefore, we are not privatising AWE; we are "contractorising" it. A company will run the establishment under contract with MoD and the workforce will be employees of a separate employing company which the contractor will acquire. This is essentially the same arrangement which operates at the Royal Dockyards in Devonport and Rosyth.

The transfer of AWE's activities to a private sector contractor does not itself require legislation. Indeed, many activities in the defence field and elsewhere have been contracted-out without legislation. The function of this Bill therefore is a narrow one: it is not to put into effect the introduction of contractor operation at AWE, but to deal with certain specific matters which arise in connection with this process.

Clause 2 of the Bill ensures that the transfer of AWE activities, and with them its staff, to the contractor will be governed by the Transfer of Undertakings (Protection of Employment) Regulations 1981, or TUPE 81, which protect the interests of staff by preserving conditions of service at the time of transfer. TUPE 81 does not preserve pension arrangements, although it does make clear that there should be no overall detrimental change in workers' terms and conditions of service, including pensions, as a result of the transfer. Under the rules of the Principal Civil Service Pension Scheme and the UKA EA Principal Non-industrial Superannuation Scheme, AWE staff will no longer be able to remain members of those schemes. MoD will therefore introduce a new, private sector pension scheme at AWE which will mirror the provisions of the PCSPS and UKAEA Principal Non-industrial Superannuation Scheme as closely as possible. The new scheme will provide benefits which are at least as good as under existing schemes. Employees will have the option of freezing their Civil Service pensions or transferring the accumulated benefits to the new schemes. No individual will be made to suffer detriment to his or her pension benefits following the introduction of contractor operation at AWE.

A new redundancy payments scheme will also be set up which will, when taken together with pension scheme benefits, provide redundancy payments of an equivalent value to those payable under the PCSPS and UKAEA Principal Non-industrial Superannuation Scheme. I must stress, however, that we do not expect redundancies among AWE's workforce as a result of the introduction of contractor operation. Indeed, as I have already said, one of the main reasons we are proceeding in this is that AWE has had difficulties in recruiting and retaining staff. However, any redundancies which should arise in the future would be fully funded under the new scheme.

Clause 2 also ensures that AWE staff will not be treated as having been made redundant when they transfer from the Civil Service to the employing company, with the same jobs and the same conditions of service.

Clause 3 of the Bill, together with the schedule, deals with the application to AWE of certain items of legislation. After vesting day, AWE land, facilities and other assets will remain the property of the Crown but will be operated by the contractor. It will be necessary for certain privileges related to Crown status to remain in force for security and, in some cases, for practical reasons.

I am sure that your Lordships will not need reminding of the paramount security considerations which are associated with nuclear weapons and their manufacture. Some of the provisions in the schedule are there to ensure that rights of access to classified nuclear weapon information, and to the highly sensitive AWE sites themselves, remain restricted to personnel who can pass our rigorous security vetting procedures.

In some cases there are also practical reasons invoked. For instance, so that MoD will have the flexibility to change the AWE contractor in the future it will be necessary to prevent a contractor from acquiring security of tenure at the AWE sites. Accordingly. there is provision for AWE to be exempt from the section of the Landlord and Tenant Act 1954 which deals with security of tenure for business tenants.

Where, for the reasons given above, AWE remains exempt from legislation which has a bearing on safety, we shall ensure that it meets standards at least as good as those required by statute. A compliance office reporting to my right honourable friend the Secretary of State will monitor the contractor's activities thoroughly, with particular attention to safety. It is the Government's policy, however, that immunities and exemptions from legislation should only exist where absolutely necessary. The schedule to the Bill was examined in detail during its passage through another place and a number of amendments were passed which reduced its provisions considerably. Clause 3 also gives the Secretary of State power to repeal or reduce any of the remaining provisions of the schedule, should it be possible to do so in due course.

Clause 4 ensures that the Ministry of Defence police will continue to fulfil its existing roles with respect to AWE. These include not only its vital guarding role at AWE sites, but also criminal investigation. The Government are committed to maintaining the highest standards of security at AWE. The Ministry of Defence will continue to be responsible for setting security standards, and for the vetting of AWE staff, who will have to meet the same stringent security requirements that apply now.

Clause 5 provides for certain expenses which might arise in connection with the employing company to be paid for out of money provided by Parliament. This includes any costs involved in setting up the company (which are unlikely to be significant). It would also cover any financial liabilities incurred by the Secretary of State in the event of his assuming responsibility for the liabilities of a company: he may, for example, wish to take back control of the employing company. That could happen in wartime or in the event of a gap between the end of one contract and the beginning of another.

This is a short and simple Bill. During the debates in another place, attempts were made to expand the Bill to include all kinds of extra provisions. In some cases the Government had no quarrel with the motives behind the proposed additions—for example, those which were intended to protect safety or security, or pension and redundancy arrangements. However, it is neither necessary nor appropriate to include such provisions in this Bill. My right honourable friend the Secretary of State already has all the powers he needs to safeguard those important priorities. Defence Ministers have given repeated undertakings that we will not compromise on safety and security, and that the pension and redundancy rights of staff will be protected. I repeat those undertakings once again, and I remind your Lordships that a compliance office reporting to my right honourable friend the Secretary of State will monitor the contractor's performance rigorously in order to ensure that he complies fully with our standards.

The Government firmly believe that the introduction of contractor operation should not be rushed. Thus, we do not intend to let the full AWE contract until 1st October 1992 at the earliest. As an interim step, a management contract was let on 1st October 1990 to Hunting-BRAE; a consortium led by Hunting Engineering Ltd. and including Brown and Root (UK) and AEA Technology. Hunting-BRAE has seconded 20 experienced managers into AWE to strengthen the establishment in the period leading up to vesting day. The early stages of this Phase 1 contract are progressing well. Subject to your Lordships' approval of the Bill, we hope to issue invitations to tender for the full AWE contract during the fourth quarter of 1991.

I should emphasise that the contractor will be most carefully chosen and, once installed, most carefully controlled. We shall let the contract, after competition, to a UK prime contractor who will have to meet our stringent security requirements. I can assure noble Lords that we shall not be required by European Community rules to install a contractor from elsewhere in the Community. The Community's authority does not extend to defence matters and, in any case, there could never be any question of a country being made to use another country's nationals for the production of nuclear weapons. Nor will the contractor have the freedom to market nuclear weapon information or hardware abroad, or in this country for that matter, to terrorists or anyone else apart from the Government.

In conclusion, we are convinced that the Government's plans for the introduction of full contractor operation at the Atomic Weapons Establishment offer the best way forward, not just for the requirements of the Trident programme but also for the longer-term future of the establishment as a whole. Contractor operation will enable AWE to recruit and retain the high quality manpower which it needs, and will also ensure that manpower and other resources are used as efficiently as possible. It thus offers the best prospects for the defence nuclear programme, for the taxpayer, and for the hardworking and capable staff at Aldermaston, Burghfield, Cardiff and Foulness. The Bill provides the framework within which that important change can be made. It therefore deserves your Lordships' support. I commend the Bill to the House.

Moved, That the Bill be now read a second time. —(The Earl of Arran.)

11.55 a.m.

Lord Williams of Elvel

My Lords, the House is grateful to the Minister for introducing the Bill. However, I have to tell him at the outset that we believe the whole Bill to be misconceived. Two major principles appear to be involved. The first is whether the research and development and manufacture of nuclear weapons should not properly remain fairly and squarely in the public sector with those most directly concerned being Crown servants responsible to Ministers who are responsible to Parliament. That seems a fundamental principle which should be upheld and which the Government, through this Bill, are attempting to give away. The second is whether contractorisation—to use that horrible word—is an appropriate solution. We do not believe that it is. Why do I say that? First, because the staff of AWE will be forced to move out of the Civil Service. Many of them joined the Ministry of Defence in order to pursue a career with that Ministry. They happen, at this point in time, to be at Aldermaston or Burghfield, or one of the other establishments. Why, just because on vesting they happen to be in one particular place, should they be forced to move out of the Civil Service, away from their careers with the Ministry of Defence and into the private sector?

Secondly, TUPE 1981, to which the noble Earl referred, applies certainly to the first contractors. Special pension arrangements apply to the first contractors. But nothing can bind subsequent contractors. Indeed, once the contract has been let there appears to be no reason at all why the original contractors should not change the arrangements the day after.

Thirdly, as the noble Earl mentioned, the experiences of government-owned contracted out operations in the United Kingdom, at Rosyth and Devonport, have not been particularly good. They have certainly not been particularly good as far as concerns job security for those working there. There have been serious redundancies. I know the noble Earl told us that the Government did not expect any redundancies as a result of vesting and of contracting out these operations. We shall have to wait and see. The experience so far with this type of operation in the UK is not good.

Fourthly, there are, in spite of all the noble Earl says, doubts about safety, particularly after the Drell Report in the United States on the safety of nuclear weapons revealed that in the case of US designed nuclear warheads some serious safety problems had been encountered which involved the redesign of the whole Trident warhead.

It is uncertain —because we are waiting for the noble Earl's reply—how far US technology was drawn on in the British design of British nuclear warheads. If the same kind of faults exist in British warheads as Drell discovered in the US warheads, there is a serious safety problem which the Government must address.

Lastly, there is the American experience. It appears that the Government's contractorisation programme is based on what they believe is the successful American experience. Rocky Flats at Golden Colorado, which makes plutonium triggers for nuclear warheads, has had to be closed down because of plutonium leaks which have polluted a large part of the state of Colorado. Los Alamos, in the state of California, has come under severe criticism in a Congressional report. I need only refer to Admiral Watkins, President Bush's Energy Secretary, who drew attention to the, years of inattention to changing standards and demands regarding the environment, safety and health".

He went on to announce a 10-point reform programme, saying that one important change would hinge at least 51 per cent. of the annual fees earned by the companies running the weapons plants on compliance with federal and state environmental, safety and health requirements. It is all a bit of a mess.

We all admit that there have been problems at AWE. As the noble Earl quite rightly pointed out, Aldermaston and Burghfield are in the Thames Valley, a rich area of high pay. The problem is that the pay has not been adequate to allow AWE to compete for skilled labour. It is nothing more than a question of whether the Treasury will allow proper pay scales for people working there so that AWE can compete. The result has been staff shortages.

I am not as convinced as the noble Earl that the management has been badly at fault. If the management has been badly at fault, or at fault, by all mean; let us put in better management. There is no problem about that. Rather more of a problem has been the failure adequately to police subcontractors at Aldermaston and Burghfield. By all means bring in from outside whatever is required, but for goodness sake—I come back to my original point— keep this activity fully, fairly and squarely within the public sector. By all means convert it into an executive agency under the "next steps" model; by all means let us have a defence services agency, if that is the appropriate mechanism. In that case legislation would be wholly necessary. The noble Earl could take away his Bill quite happily, and we could get on with what is a heavy business programme in the House.

I reiterate a fundamental principle. There should be no dilution of ministerial responsibility. It is the duty of the Government and of no one else to ensure the defence of the realm.

12.2 p.m.

Lord Mayhew

My Lords, it is common ground that there are serious management problems at AWE and that radical change is needed. The question is whether the changes should take the well tried course of a Defence Services Agency or whether they should take the extreme path of contractorisation recommended by the Government. It is plain to my noble friend; and myself that the Government have made the wrong choice on this point.

It is a little significant that the noble Earl did not spell out in any detail the practical problems with which AWE is now faced. One hazards a guess that if one becomes involved with detailed practical problems, one comes to the conclusion before long that what is needed is a practical solution. The trouble is that the Government have approached this not from the practical point of view but from the ideological point of view. We get the impression that the Government have two strong motives in presenting the Bill. The first is to hand over responsibility for the mess to somebody else as soon as possible. The second is to pay homage to the Thatcherite doctrine of privatisation. As a result we have a proposal which is drastic and doctrinaire.

I notice that at the Report stage of the Bill in another place the Parliamentary Under-Secretary of State, Mr. Carlisle, argued from first principles, rather as the noble Earl did in introducing the Bill. Mr. Carlisle said: Thy; Atomic Weapons Establishment is involved in research and development and in manufacturing. In our view, such an establishment belongs in industry and not in government".—[Official Report, Commons, 24/4/91; col. 1103.]

That is a clear statement of Conservative ideology. I am reminded of the clear statement of socialist ideology which I preached as a boy. It was that the means of production, distribution and exchange belonged in government and not in industry. I confess that I was wrong, but in mitigation I can say that, unlike Conservative ideologists, I have since grown up. I have learnt that sweeping generalisations often lead to disaster in particular cases. If ever there was a particular case, it is the production of nuclear weapons.

This is a particular case which needs to be handled on its particular merits and not shoved through the sausage machine of Thatcherite ideology. The Atomic Weapons Establishment is of such importance and of such potential danger that Ministers have no right to shuffle it off on to other people. The noble Earl said that the Government are not doing that. He said that the contract will give full powers of control to the Secretary of State and that the contractors can be taken to court and the contract annulled. That is true on paper but it is not true in practice. In practice, contractors will have considerable powers against the Government. They will know that the last thing the Government want is to take the contractor to court. The very idea seems absurdly difficult and embarrassing for the Government. How will they look if there is a dispute in the courts about, for example, the safety and production of nuclear weapons? How will they look on "Panorama" or "This Week" in those circumstances? How will they look if they annul the contract? That would delay and disrupt everything.

In another place the Minister gave an assurance that parliamentary Questions will continue on the subject of the production of nuclear weapons. In what form will they continue? Let us suppose that a parliamentary Question is put down about a hold up in the production of these weapons. Today the Minister would reply, "Yes or no, there is a hold up; yes or no, we will take this or that action to correct it". But under the new dispensation the answer will be different. The answer will be, "I have consulted the contractors and they assure me that they are taking this or that action". If there are supplementary questions the Minister may reply, "I shall draw the attention of the contractors to the point which the honourable Member makes"; or, "I do not think it is the business of a Minister to interfere in day-to-day questions of management".

The fact is that the Bill dilutes ministerial responsibility. The assurances about ministerial control and about Ministers taking to court the contractors and annulling the contracts are in practice, to those with experience of these matters, meaningless. I reject the Bill on this ground alone—that the production of nuclear weapons is not a fit matter for privatisation. It is not right that the Government should shuffle off their responsibility for largely ideological reasons.

There are other reasons too—we can deal with some of those in Committee—but one specific objection mentioned by the noble Lord, Lord Williams, should to be discussed now. No matter what incentives the Government may give, and no matter how admirable the intentions of everyone concerned, the requirements of safety directly oppose the contractor's desire for profit. That is a fact. By implication the Government admit it. They admit that they will give financial incentives to the contractor to maintain high standards of safety. Thus the Government agree with what I am saying; that there is a basic conflict between the requirements of safety and the contractor's hopes of profit.

Safety in the production of nuclear weapons is an incredibly expensive business. Huge sums must be spent on emergency facilities, on back up and on duplicating men and materials. Huge sums must be spent on contingencies which almost certainly will never occur. What will be the attitude of a profit-making concern to expenditure of that kind? Its first aim will be to get the Government to pay. If the Government pay, that will be all well and good—except, that is, for the taxpayers. However, let us suppose that the Government refuse to pay. What will the contractors do then? Will they pay it themselves or will they argue that the expenditure is unreasonable. If they do so argue and say that the Government should pay, what will happen then? Either the Government will pay up—and in my judgment they certainly would —or the contractors will take the Government to court and argue the details and meanings of the contract, with all the embarrassing and disastrous consequences which I have already described.

It was not necessary to take an extremist view. After all, let us take, for example, the House of Commons Defence Committee. On this subject, it has shown itself to be extremely alert and informed. Indeed, it was a Defence Committee of the other place which originally blew the whistle and which led the Government to take action over the production of nuclear weapons. We should respect the committee's opinion that the Government are going too far. In my view, the Government are going too far. The measure is too extremist and too ideological. We should reject it.

12.11 p.m.

Lord Zuckerman

My Lords, contractorising the production of nuclear warheads is not a new idea. In fact, it was mooted at the very beginning of our nuclear age when the recommendation of the Maud Committee that we should proceed in this country to the manufacture of nuclear weapons was considered and rejected. That was the time when Mr. Winston Churchill, the then Prime Minister, said that he was satisfied with ordinary explosives. Nor is the association of manufacturing industry with the production of nuclear warheads anything new.

During the war the organisation called Tube Investments which was run by Wallace Akers, as I seem to recall, was responsible for a number of contracts with industry. When the war ended the Ministry of Supply, up to the year 1954 when the Atomic Energy Authority was created, was responsible and also contracted out practically all of its work to industry. The Atomic Energy Authority, about which my noble friend Lord Sherfield will be able to talk much better than I can, has also had numerous contracts with industry.

I believe that it was in 1964 that the Ministry of Technology was created. It became responsible to Parliament for the Atomic Energy Authority. It, too, had numerous contacts with industry. It then handed over its responsibility for the weapons sphere to the Ministry of Defence. As I understand it, those arrangements still continue. When it was handed over to the Ministry of Defence, if I remember correctly, it was handed over to what was then called the procurement executive. Today, it is the defence procurement department.

I do not know exactly what is the position now, following on from Mr. Heseltine's changes in the chain of command in the ministry in 1988. However, I know that Aldermaston and the associated installations really belong to the defence procurement side of the ministry. That to me is somewhat important.

We all know that the main reason for the Bill is the difficulty or, if I may put it this way, the hope that the transfer of the management of Aldermaston and the associated departments and laboratories will overcome some of the staff and management problems with which Aldermaston is at present contending. It is assumed that contractualisation will allow greater flexibility to deal with such problems, especially as regards recruiting and retaining good staff. That was precisely the same reason why the Atomic Energy Authority was set up in 1954. It was set up in order to ensure that the people concerned were not constrained in their activities by unnecessary bureaucratic controls.

There was another issue concerning the retention of staff. I refer to the intellectual isolation of really good people who became involved in the business of Aldermaston. It was quite different in other aspects of military procurement where there were links with the outside world.

Perhaps I may say now that I do not think any complaint could have been made at that time about the managerial competence of the people who were chiefly concerned. I refer here to the late Lord Hinton who was one of the most brilliant managers that this country has ever had. The Government will be lucky if they find a contractor which had staff of his level of competence or staff with the competence of Sir John Cockcroft, of our late colleague who has recently died, Lord Penney, or of one of the present Members of your Lordship' House, who is unfortunately not on the speakers' list today but who was involved, the noble Lord, Lord Kearton. If by any chance there is a company in the country which has staff with the competence of those men, we will have nothing about which to complain.

We understand from the noble Earl's exposition of the Bill that contractorisation does not mean privatisation. Clearly there is no place for competition in the marketplace in the production of nuclear warheads. We also know from Clause 1 of the Bill that the contractor will be given his orders and that he will carry out a series of "designated activities". We also know that there is no transfer of land or assets and that security of employment will be assured by the formation of the second company which will act as an employment agency. All that sounds very good. But, as we have heard in the speeches of the noble Lords, Lord Williams of Elvel and Lord Mayhew, there are questions of principle involved.

I do not wish to pursue that particular theme. There are two matters which concern me and which cause me a little disquiet. But I am sure that the Minister will be able to allay my fears. Clause 1(2) gives the contracting company very wide responsibilities, connected with the development, production or maintenance of nuclear devices or with research into such devices or their effects".

Those are pretty wide responsibilities. As I understand it, for that reason the Government will be setting up a "compliance office" which will ensure that the responsibilities of the contracting company are properly and safely discharged. That matter was referred to most eloquently by the noble Lord, Lord Mayhew. The responsibilities of that office will relate not just to safety but to design and manufacture all of which must be in accordance with the designated activities. The Secretary of State's responsibility remains all the time, and, as was said, there can be no dilution of that responsibility, but how will it be assured? Who will define the designated activities? It is not easy to ensure contractorisation in that field. It is a field sui generis; it always has been. It has always created difficulties. How big will the compliance office be? What will be the qualifications of its staff? Will they have the competence critically to comment upon changes that may be made in the design of warheads, or the purpose and progress of research and development being carried out?

Reference has been made to a parallel with the United States. It is a parallel which fills me with unease. The industrial companies and the two major laboratories, which are now contracted to the Department of Energy in the United States (the institutions which correspond to Aldermaston) have a free hand. The result is that they are free to produce ideas which are transformed into weapons systems and operational requirements for which there is no military authority. They fuel the arms race. I merely mention that because the US parallel is not a parallel to which I would recommend any noble Lord to pay attention. It is not one which could operate in this country with only one contractor taking over, as I understand it, with its staff undertaking only designaited activities.

I should like to know what the Government's response is to the point made in the red booklet which I believe most noble Lords will have received from the staff organisation at Aldermaston. It claims that the compliance office will add to costs because if it is to oversee all the work being done it will have an enormous task on its hands. I assume that there will be enough people in the compliance office to undertake that task. To whom in the vast MoD will the compliance office report? From whom will the Secretary of State take advice? I understood the Minister to say that he would take his advice from the compliance office. Alternatively, will he take advice from the defence procurement department, which is

responsible for and, in effect, owns Aldermaston and its associated institutions, from the military or from the Chief Scientific Adviser?

That brings me to the last point to which I wish to refer. It is the only one of which I have personal experience, as the noble Lord, Lord Mayhew, will remember from his ministerial career in the Ministry of Defence. From 1958, when we concluded a defence agreement with the United States, the department of the MoD responsible for the exchanges which took place under that agreement was that of the Chief Scientific Adviser. In those days he worked hand in hand and perfectly happily with the Director of Aldermaston who in my time was mainly Sir William Penney. My staff was small. It included at its top Sir William Cook, a man who had almost as much experience as Sir William Penney. They worked hand in glove. Every year there was a stock-take exchange with the Americans. I chaired that exchange. During the course of a year there were any number of small exchanges on specialist problems.

I understand that that agreement and those arrangements still continue. I understand that a stock-take meeting is due to take place in the near future. If the Chief Scientific Adviser still chairs those meetings, from where does he obtain his information? Will he have a staff to oversee what is being done by the contractor so that he can answer any questions about any deviation from design and so on?

In my time too, arms control was a part of defence policy. I obtained my information from my personal contacts with top scientists in the United States, but I was directly answerable to the Minister, who became Secretary of State, and to the Prime Minister. Sir William Penney was brought in by the Prime Minister. He was head of Aldermaston and knew what was going on.

At the behest of the Prime Minister, Mr. Macmillan, Bill Penney and I had to go to the United States more than once to clear up matters relating to the political aspects of our nuclear policy. What will happen in the future? Who will take care of the close relations that we must have with the United States in accordance with the 1958 agreement which took a considerable amount of trouble to get through? Will it be the head of the contracting company? Will it be the head of the monitoring body which is to be set up? To put the question in another way, under the Bill if it becomes an Act, will the Secretary of State for Defence in future exercise his ministerial control of the new organisation through one channel or three channels? Will it be through the defence procurement department; the military, who came into the picture in a different way as I understand it as a result of the 1988 changes made by Mr. Heseltine; or through the Chief Scientific Adviser's small department?

I believe that at present there is divided responsibility in what is being put forward by the Bill. This is not a field in which we can afford to have any divided responsibility. In my time it was held together by the Chief Scientific Adviser's department. I should like to be assured that the Chief Scientific Adviser still has a major part to play in nuclear policy and by that I mean a part that he can play independently and in general. Let us remember that nuclear policy is not fixed in tablets of stone, wherever the stone comes from, be it Whitehall or other countries.

12.31 p.m.

Lord Ironside

My Lords, as this Bill paves the way for the full contractorisation of AWE, we must, if possible, look at the issues in the round. It is somewhat difficult to do that when the nuclear weapons culture has been wrapped up in safety and secrecy for something over 40 years now. But I am glad to see that the levels of secrecy are coming down and the levels of safety are going up.

Our cue for today can be taken from last Wednesday's debate on defence. In that debate my noble friend the Leader of the House confirmed the Government's intention to keep a sensible mix of nuclear and conventional weapons to provide effective deterrence. Therefore any alternatives for AWE are hypothetical for the moment. If policy changes, we shall have to think again. However, I believe that it makes sense for the Government to take the present course, where AWE becomes what amounts virtually to an agency operating under the GOCO umbrella. That surely provides flexibility to make policy adjustments and meet changing operational requirements. There is parliamentary accountability because the Select Committees in another place can always call evidence on the subject at any time that they wish to do so.

We ploughed through the contractorisation principles when we debated the commercial management of the Royal Dockyards. The management contractors are now into their fifth year of working the system, which includes nuclear platforms, nuclear propulsion and the nuclear weapons element of fleet support. As the House is aware, I have an interest to declare closely connected with the Vanguard/TridentD5 support arrangements. I believe that the experience of the contractors at Devonport and Rosyth is an important leader for the Government in drawing up the contract at AWE.

I am grateful to my noble friend the Minister for arranging for members of the All Party Defence Study Group to visit Devonport and Rosyth to see the Royal Dockyards at work. I was particularly impressed by the way in which the flag officer and naval base commander at Devonport work so closely with Devonport Management Limited to support our high-tech low-manned fleet of surface combatants and nuclear submarines. Perhaps I may say that that massive and busy RN complex is something to be proud of I believe that it owes its success to the enthusiasm of the Flag Officer Plymouth, Vice-Admiral Sir Alan Grose, with the nuclear contractorised refit complex having such an important part to play in support of the underwater fleet, which is now predominantly nuclear.

I was glad to have an insight into the thoughts of Devonport Management Limited, the contractor which is proposing ways to develop nuclear fleet support for the future, bringing valuable industrial experience into the defence field. Equally, I believe that when he is chosen, the contractor at AWE will also bring valuable industrial experience to that field and will make investments in the management of establishments of this kind. Therefore I do not have any fears of commercial management at AWE. In fact, it is a logical follow-on to my way of thinking.

There are particular points that I want to make in relation to the Bill. First, the Secretary of State's powers to designate the activities for the contractor are good, as we are still learning from US experience and our own current experience at Devonport and Rosyth. To determine the scope and extent of the contractual plans, one has to sieve through the Government's statements and Select Committee evidence. I have done it and there is a mass of it.

Because of the desperate need to beef-up the manufacturing base for Trident warheads, I believe that it is absolutely right to seek industrial help, drawing on the expertise that exists in the companies that make up the National Nuclear Corporation. As the report of the noble Lord, Lord Tombs, is for ministerial eyes only, we cannot assess whether or not the Government are taking the right course completely or know whether they accept all his recommendations. However, I guess that his recommendations centre on overcoming the weaknesses in production management expertise in a way that does not upset the research function at AWE.

However, what can be said is that the A90 building investment is timely as the existing and very ageing manufacturing facilities which are now something like 25 years old are being replaced by the new advanced production facilities which are needed to support research manufacturing needs as well as the volume production of warheads. The contractor can therefore manage the research functions as well as production functions as designated to the best of his ability, and can confidently make investments there as well.

My second point concerns the compliance office which was set up in the middle of last year as the customer watchdog staffed with civil servants. As well as ensuring contractor compliance, it provides a quality assurance audit function and will log up the safety record—or, one might say, the safety miles—of the contractor for incentive points in respect of the environmental safety and health standards on which he will be assessed during the currency of the contract and at the end of it. But herein lies a difficulty. The MoD has a firm commitment with its contractors to achieve the highest standards of radiological protection for service and civilian personnel, which predates the Gardner Report. My noble friend Lord Arran has confirmed that the Government will continue to keep up the highest standards of safety.

The safety division at AWE provides the radiological protection services. Dr. David Glue the director of the compliance office, is faced with the fact that health physicists are in short supply. As my noble friend Lord Arran said, there has been and still is a shortage of recruits at AWE and the defence radiological protection service has introduced a graduate entry training scheme at Greenwich to overcome that problem. This scheme is said to be partially successful. However, good graduates do not make good health physicists until they have built up considerable experience.

The Defence Select Committee stated in its report: It is essential that the commitment to radiological protection at AWE is maintained following contractorisation and we therefore recommend that a duty to keep health physics; staffing up to strength should be included in the relevant contract".

Does that mean that the compliance office will eventually be contractorised? The safety division at AWE has been contracting out tasks already. Why should it not: do so if it is short of staff and can seek help from industry? I believe therefore that there is a good case, in view of the staff pressures, for Dr. Glue to sub-contract the work of the safety division completely. Will my noble friend therefore clarify the position and say whether Dr. Glue can be encouraged to consider the option I have suggested which would be immediately helpful, whether or not the compliance office is contractorised?

I support the Government in taking these steps to contractorise AWE. Those powers will provide the Secretary of State with a flexible means of meeting operational needs in the future in the most cost-effective way.

12.41 p.m.

Lord Kennet

My Lords, I do not think it is going too fat to say that the Bill has already been destroyed in this debate. I have been extremely struck, as other noble Lords must have been, by the contributions made by those who have direct experience in this field. The noble Lord, Lord Mayhew, has experience in a ministerial capacity. I was above all struck by the speech of the noble Lord, Lord Zuckerman, in which he raised grave doubts. It only remains for us to hear the speech of the noble Lord, Lord Sherfield, to see whether he can find anything to say for the Bill.

The noble Earl, Lord Arran, introduced this Bill for one reason and one reason only; namely, to counteract the difficulty of obtaining appropriate managerial staff in the Thames Valley region. Are we really to legislate on a matter that profoundly affects national sovereignty because of the difficulty of obtaining good managerial staff in a particular region? If by chance the Atomic Weapons Establishment had been established in the North of England where there is less difficulty in recruiting appropriate staff, would the Bill not then have been introduced? If we are not to surmise that, we should be given some other reasons why the Bill has been introduced.

Public ownership and control of the manufacture of nuclear weapons does not have all that brilliant a history. I am the first to concede that fact. In the Soviet Union between 1949 and 1960 the main nuclear weapons production plant in the southern Urals released more than 20 times the emissions of Chernobyl in the way of environmental pollution. The French nuclear weapons facility at Saint Aubin near Paris is considered by the well-informed to be staffed by people who are either alarmingly over-complacent in this matter or who may be covering up unacceptable levels of pollution. Aldermaston, too,

has had its accidents and exposures. I know that my noble friend Lord Stoddart is well informed about that plant and will perhaps discuss it. Aldermaston did not even introduce whole-body monitoring for years after its introduction was made compulsory in civil nuclear establishments.

However, in the United States production management has been in private sector hands throughout. If we compare the situation here with that in the United States a pretty startling picture emerges. When Admiral Watkins became the Secretary for Energy he sacked one lot of private operators because of their appalling record on safety, pollution, cover-ups and plain fraud. He closed down one whole plant immediately—the Feeds Materials Production Center. He closed several facilities at the Savannah River plant on safety grounds despite the fact that tritium was produced nowhere else. The Savannah River facilities remain closed down two years later. Proposed new constructions that were to have been paid for by the taxpayer were cancelled as they were deemed to be needless. However, they were of course lucrative to those who conceived them.

At some places, for example Hanford and at Rocky Flats—and my noble friend Lord Williams spoke about Hanford—which are also under commercial management, ever more widespread soil contamination is being discovered. That contamination threatens groundwater over a vast area. According to the US Department of Energy, many tens of billions of public dollars will have to be spent on cleaning up. Even then the Office of Technology Assessment of the United States Congress believes the department is still understating the problems. Outsiders estimate the figure may finally run into hundreds of billions of taxpayers' dollars. There are also many tens of thousands, if not hundreds of thousands, of people entitled to compensation. That compensation is not included in the figures I have already mentioned.

The Washington Post recently described the environmental clean-up as the, fastest growing part of a declining military budget".

We should note that the firms involved were household names. For example, Westinghouse, du Pont, and Bechtel. The other day I was astonished to hear that the Minister who replies for the Government on these matters appeared to know nothing at all about this appalling record of private management in the United States.

I wish now to discuss the matter of the inspectorate. Perhaps I should refer to the compliance office in this connection as I believe that office will undertake the work that is carried out by the Nuclear Installations Inspectorate elsewhere in British industry. I noted the proposal made by the noble Lord, Lord Ironside, that the compliance office should be contracted out, or placed in private hands. That would be a neat solution finally absolving Ministers of all control and the Government of all responsibility to Parliament.

Lord Ironside

My Lords, I did not propose that that should happen. I was asking the Minister to clarify the position.

Lord Kennet

My Lords, I stand corrected. If one were feeling paranoid, one could easily suppose that there was a hidden Conservative agenda behind this matter as that was an extraordinary comment to make from the Government Back-Benches.

We should note that the Bill exempts the contractorised processes at Aldermaston from the operation of the nuclear installations legislation of 1985. Therefore those processes are free of the ordinary controls. They will be solely under the control of the compliance office. How will sufficiently qualified inspectors be found? Who will pay them? They will have to look after public health and security in the sense of national security. They will have to look after safety as regards the operation of the plant. Their duties will cover an enormous range. Above all, I hope the Minister will give us an assurance that the inspectors will be sufficiently well paid to maintain their integrity. Let us not be naive about this matter. If one does not pay inspectors enough, they can be bought by those whose plants they are inspecting. Examples of that have been rife in our administration for years.

Will the International Atomic Energy Agency inspectors be allowed in? Unfortunately it is a fact that the cutting of corners to achieve what is required is even more of a temptation in the private sector than in the public sector. Production will always take precedence over safety. That has been happening in the United States and is still happening despite the efforts of Admiral Watkins over two years to put a stop to bad practices. What will be the situation with regard to insurance? The Government are exempting the private operators from industrial rates. This is not a true privatisation; it is an example of a privatisation which merely looks good. The exemption I have just referred to involves a huge state subsidy in itself. Will the private operators carry the cost of insurance, or is this another case of the taxpayer carrying the cost while the company carries off the profits that it will be so sorely tempted to produce? I see that the Government are providing ECGD with 100 per cent. re-insurance cover after it has been privatised. Is something similar envisaged in this case?

There remain jurisdiction problems over what was to have been the first permanent waste repository in this country. Where is the radioactive waste from Aldermaston to go in future? Who will run the disposal site? Will it be public property or private property?

Lastly, and perhaps most serious of all, in the United States a Japanese firm has been proposing to buy a 40 per cent. interest in a Connecticut firm which makes precision tools for machining nuclear warhead components. In Congress the proposal has been criticised but the Administration approves. That particular Japanese firm is said now to have withdrawn, but no doubt there could be others. I gather that here the Government are not proposing to exclude, debar or rule out in advance the holding of a stake in the contracting firm at Aldermaston, etc., by foreign firms. Can we have a statement about that?

Finally, that aspect and others make me wonder whether the Bill is in keeping with the Nuclear Non-Proliferation Treaty. Noble Lords who are not of purer eyes than to behold iniquity will know that the Israeli nuclear weapons programme has been very largely made possible by private contractors who are engaged in building nuclear weapons in the United States. There is an unavoidable conflict between on the one hand the interests of public health, national security and international security, and on the other hand the accumulation of private profit. I do not want to be dogmatic or doctrinaire; profit is good in its place, but not at the heart of national sovereignty and the construction of weapons capable of destroying a large proportion of the human race.

I come back to the question which everybody must surely be asking: if the only reason for this measure is the difficulty of getting good managers in the Thames Valley area, why on earth did the Government not simply increase the pay of managers and provide their own?

12.52 p.m.

Lord Sherfield

My Lords, I rise to support the principle of the Bill, which in my view is long overdue. Perhaps I should declare an interest in that I live within three miles of the establishment.

When I first knew the AWRE (as it was then known) it was run by Dr. William Penney, (as he then was) who went on to render such great service to the nation and whose death, as the noble Lord, Lord Zuckerman, said, we mourned recently. It was a centre of excellence. When the long period of non co-operation between the United Kingdom and the United States in nuclear technology was finally ended in 1958 and full and complete exchange of information was re-established, it emerged that in the nuclear weapons field while the United States was miles ahead in engineering, in research and development we had kept up with the Americans and in some areas were ahead of them. That was AWRE's achievement.

That standard was fully maintained up to the time when the establishment was transferred from the United Kingdom Atomic Energy Authority to the Ministry of Defence. Although I was then no longer chairman of the AEA, I was sure that that was a mistake and would damage morale and performance at Aldermaston. So it proved. After a time this was recognised by the Ministry of Defence, which wanted control of Aldermaston to revert to the Atomic Energy Authority. However, by that time the responsibility for the establishment had been transferred from the Ministry of Defence to the Department of Energy and the move was blocked by bureaucratic bickering.

From then on the situation deteriorated. The Government refused to allow the AWRE management to pay the going rates for highly skilled craftsmen in the high-tech. Berkshire area—as has been pointed out by other speakers—with the result that AWRE lost most of them and had to resort to unusual expedients in order to keep the rest.

That was not the only difficulty that arose. The Civil Service does most things extraordinarily well but it cannot run an industrial establishment. The belated realisation of that has finally led to the introduction of this Bill. The language of the Bill itself as an enabling Bill is not illuminating. I have had to rely for much of my in formation on the seemingly endless deliberations in another place and a reference sheet supplied by the Library of another place.

As I knew it, AWRE was not only directly involved in research and development on nuclear warheads but also in research in related fields. It also had a first-rate apprentice school. In these transfers of responsibility and control it is the level of research and related activities, such as the apprentice school, which usually suffer,

There is no mention of research in this enabling Bill. Perhaps such a reference would be out of place. If so, some assurances on that point are essential. I understand that some such assurances have already been given in Committee in another place, though I could not find the reference in the Standing Committee's voluminous records. The point was raised again in another place on Third Reading by the honourable Member for Canterbury, who made a most effective speech which I shall not endeavour to summarise. He pertinently pointed out that contractors normally do very little work on pure research, and that Provision must therefore be made for it in the contract. He did not receive an answer. I consider it most important that assurances about research should be en again in this House and I hope that the Minister will respond to this request.

I have only one other main point. I understand that Nuclear Technology (formerly AEA) is a member of the consortium which at present holds a management contract for some aspects of the operation. Its participation is much to be welcomed. It is essential that whoever is awarded the substantive contract should have full knowledge and experience of dealing with the production, fabrication and handling of plutonium and the other ingredients of nuclear warheads.

On the issues of safety and security, I do not share the anxieties which were expressed at great length in another place and which have been raised again today. The responsibilities in those areas will remain with the department.

The noble Lord, Lord Zuckerman, has quite rightly drawn attention to the importance of the competence of the compliance office and of the monitoring of the scientific side of the operations. That is of the first importance, but I think that we can rely on the assurances that the department and Ministers will enforce the necessary standards. Assurances on these points have been given again and again and I am sure that the Minister will be able to reiterate them when he comes to reply.

1 p.m.

Lord Stoddart of Swindon

My Lords, like my noble friend Lord Kennet, I listened carefully to the Minister's opening remarks and found it quite incredible that one of the major reasons for bringing forward the Bill was the difficulty of recruiting staff in the Thames Valley. As I live in the Thames Valley I understand that staff are in short supply and that wages ire relatively high, but it should surely not have been beyond the wit of the Government to deal with that problem, particularly as the trade unions offered to help them to solve it. They could have solved it without this Bill and I am surprised that they saw fit to bring forward such a Bill.

I seem to have had quite a long association with the Atomic Weapons Establishments at Aldermaston and Burghfield. I took part in those early marches from Aldermaston to London. Those were the days when people spat at you and hurled insults, and sometimes missiles, at marchers; but since then people have become more understanding and tolerant of a point of view different from their own. Indeed—I might as well say this—the proportion of the population which favours unilateral nuclear disarmament is probably greater now than it used to be. However, we must accept that all parties are now wedded to the retention of Britain's nuclear weapons. The Labour Party has declared its intention to continue with the Trident programme when it gains office. The Atomic Weapons Establishments are therefore likely to be with us for a long time and it is essential that we get their control and management right on a long-term basis.

In my view, the Government are taking the wrong road through the Bill. It will not bring about the efficient, effective, safe and accountable management which is essential and which should be the aim of all of us. I support the alternative that was put forward from the Front Bench by my noble friend Lord Williams of Elvel. There are alternatives which the Government have clearly not considered, or have rejected for some dogmatic reason.

I also had quite a lot to do with people working at AWRE, as it then was, during the years that I nursed the Newbury constituency, in which Aldermaston and Burghfield are situated, as a Labour candidate. I fought the seat twice—once in 1959, when I lost by 10,500 votes, and again in 1964 when the majority against me was under 5,000, so I did make some progress at that stage. I met many of the people who worked at AWRE Aldermaston and ROF Burghfield. My agent himself worked as an engineer at Aldermaston. I found the people first class. Many were highly skilled, but, above all, they were highly responsible and conscious of the duty that lay with them to ensure the safety of the people who worked inside the plants and of those who lived in the surrounding areas. At that time Labour candidates were regarded with some suspicion by the authorities. I am not at all sure whether the career of my agent, Mr. Spiller, was enhanced by his loyalty to the Labour Party and to myself. However, times have changed and the Labour Party is now so respectable that it probably outranks the Tories in that respect.

Baroness Seear

My Lords, does the noble Lord mean that times have changed or that the Labour Party has changed?

Lord Stoddart of Swindon

My Lords, I think that perhaps both have changed, but I shall not go into that matter any further.

Security is a serious and difficult subject which will not be made any easier by contractorisation. The House is entitled to have detailed assurances that security will not suffer under the new arrangements. I hope that those assurances will be forthcoming and will be underlined by the noble Earl when he winds up.

As I live within 14 miles of Aldermaston and six miles from Burghfield I have, as have thousands of other people living in the area surrounding those establishments, a keen interest in how they are managed, who manages them, how they are staffed and whether they will maintain or improve the safety of the operations. People in the vicinity are bound to be concerned as there are risks from radioactive discharges to the environment from both Aldermaston and Burghfield. It is not only a question of the risk of airborne contamination but of water contamination through liquid discharges to the River Thames and the River Kennet. That is serious as a significant proportion of drinking water is now obtained by extraction from the River Kennet. People are naturally anxious to have firm assurances that there will be no additional risks from the privatisation of management.

I must say to my noble friend Lord Kennet that the problems to date have been few. Radioactive leakages are rare and small and the people, although concerned and wary of such establishments in their midst, especially when their operations are shrouded in the tightest security, have accepted them without much demur because they have been managed by government, whom they have trusted to take all possible safety precautions regardless of cost and without the requirement to make a profit. People in the area have not been consulted about the new arrangements regarding management, but they are bound to be anxious about contractorisation, which they will see as a means by which the Government can reduce their costs and private firms make a profit. That is certain. The Government obviously wish to reduce their costs and no private organisation will manage those establishments unless it sees a profit at the end of it. Those twin aims are bound to have an effect on the organisation and there is bound to be a suspicion that corners will be cut to achieve those aims with the possibility that safety arrangements will suffer, as has apparently happened in other countries where private management has been introduced—a point to which my noble friend Lord Kennet referred.

I have no doubt that the monitoring of radioactive discharges will continue to be of a high order, but unfortunately such monitoring can tell us only what has happened, not what will happen. Once they are let loose, radioactive discharges cannot be rounded up and put back where they belong. They are like the contents of Pandora's Box.

I turn now to the position of the people who work in those establishments. All kinds of assurances have been given about their pay, conditions of service, pensions and job security. We are told that no redundancies are envisaged and that no one will be sacked, but we have heard it all before in one case after another. When the crunch comes and the Government turn the financial screw, or the contractor wishes to maintain his profit, it is the employees who will suffer and those lowest down the seniority scale will, as usual, suffer first and most.

The trade unions have done everything possible to help and have offered to co-operate with the Government in the setting up of a new government agency to manage the Atomic Weapons Establishment, but to no avail. The Government apparently are determined to press ahead regardless of any other consideration than to pursue their privatisation dogma and, by sleight of hand, to massage the Civil Service numbers. I do not believe that that is a good reason for bringing forward this Bill. I hope that in Committee my noble friend Lord Williams, and other Members of the House, will be able at least to improve the Bill even if we cannot throw it out.

1.10 p.m.

The Earl of Arran

My Lords, I have listened with great care to the speeches made during the debate. As I explained at the beginning of the proceedings, the purpose of the Bill is a narrow one. We do not need legislation in order to contract out the activities of the Atomic Weapons Establishment, nor would it be sensible to attempt to incorporate in the Bill all the detailed arrangements which will cover the introduction of contractor operation. Those arrangements will be worked out with great care and in great detail over the next year and a half during the drafting of the contract, the selection of the contractor and the negotiations with the successful bidder. The Bill covers those matters which can only be addressed by legislation. It regulates the transfer of AWE staff from the Civil Service to an employing company. It preserves the role of the MoD police. And, finally, it deals with the application to AWE of certain items of legislation.

It is natural, however, that in debating the Bill your Lordships should wish to discuss a wider range of issues which bear on the introduction of contractor operation at AWE and related matters as well as those which relate directly to the content of the Bill itself.

The debate has indeed been full and wide-ranging, and I would now like to answer some of the points which your Lordships raised. If there are further points on which it would be helpful for me to write to noble Lords, I shall certainly do so if I fail to cover them fully today.

The noble Lord, Lord Williams, asked: why contractorise? The proposals arose from a full review carried out in 1989 of the way forward which took into account the points raised by the Select Committee for Defence in its fifth report on the Trident programme, 1988-89. The review demonstrated clearly that no other solution could offer the combination of access to private sector production management expertise and the fullest flexibility to deal with manpower shortages. Those are essential features of the Government's plans to ensure that AWE meets the future requirement of the Trident programme.

The noble Lord also asked this question: if pay is a problem, why is it not possible to increase it without full contractorisation? To some extent that has already been done by special pay additions (SPA). However, it is too simplistic to say that pay is the only consideration. We believe that the long-term solution is to couple freedom from Civil Service grade structures with full private sector efficiency and flexibility. The noble Lord, Lord Kennet, too was concerned on that point.

Several noble Lords, including the noble Lords, Lord Williams and Lord Sherfield, asked: why contractorise research and development as well as production activities? Research at AWE is not a stand-alone activity. It is focused towards existing and future production requirements. We consider the integration of research development and production to be fundamental to the maintenance of the United Kingdom's nuclear warhead capability.

The noble Lord, Lord Williams, was worried about —to use his term—the changing terms and conditions of service. I can assure your Lordships' House that the protection of TUPE does not cease on day two. The terms and conditions to which the workforce are entitled must not be changed as a result of the transfer either then or later, or on any subsequent transfer. In between terms and conditions can be changed only by negotiation.

The noble Lord asked: in that case why not have an agency option rather than contractorisation? We have seriously considered the arguments in favour of a "Next Steps" agency at AWE. Such arrangements have considerable attractions for those organisations which must remain within the Civil Service. However, AWE is not such an organisation. It is involved in research, development and large scale manufacturing. We believe that such industrial enterprises are generally run more efficiently in the private sector. Agency status would in any event be only a partial solution to the problems at AWE. It would not involve the full and early introduction of private sector production and management expertise. Nor would t allow access to the corporate back-up of a large industrial concern. It is only full contractorisation that can give full private sector management flexibility together with pay flexibility without reference to Whitehall.

Several noble Lords, including the noble Lords, Lord Kennet and Lord Williams, referred to the contractors' susceptibility to foreign control. Although we shall indeed be looking for a UK-based prime contractor, the underlying point—that of security is wider than the question of foreign shareholdings. There may be UK companies or individuals who would not meet our high security standards and whom we would find unacceptable as our operator contractor at AWE. Conversely, AWE experts have always co-operated closely with their counterparts in the United States; and we cannot conceive of any objection in principle to a degree of involvement from companies based in the US.

We intend therefore to address the ownership question at tender and contract stages and not by legislation. We shall ensure that the choice of contractor and the terms of the contract take full account of all security considerations. The contractor will have to comply fully with our security requirements. That includes satisfying my right honourable friend the Secretary of State about the ownership of the contracting company. We shall also take measures to ensure that once the contract has been let there is no possibility of national security being compromised through shares changing hands.

Lord Williams of Elvel

My Lords, perhaps I may press the noble Earl on the question of foreign ownership. Hunting-BRAE has part foreign ownership from Brown and Root. Brown and Root is a United States company. As I quite understand, the noble Earl says that the United States is one source where the Government may admit foreign participation in the prime contractor. Does that mean that the Government wish to exclude all other countries? For instance, would all countries of the European Community be excluded from part ownership of the prime contractor? Is that what he is saying?

The Earl of Arran

My Lords, that is a somewhat detailed point which perhaps I may answer at the end of the debate.

The noble Lord, Lord Williams, raised the possibility of civil servants being thrown out, as he called it. The majority of civil servants at AWE have spent all or most of their careers at the establishment. It is not true to say that we are drastically altering their career paths by separating AWE from MoD. We shall, however, be holding a preference exercise during which staff will have the opportunity to say whether they prefer to remain at AWE after vesting day or move to another post elsewhere in MoD. If a suitable post is available, we shall do our best to meet such preferences although our first priority must be to maintain the available workforce at AWE.

The noble Lord, Lord Mayhew, expressed anxiety about safety versus profit. We shall draft the AWE contract in such a way that it is not in the contractor's interest to cut corners on safety. His performance will be thoroughly monitored by the compliance office to ensure that it meets our standards. The compliance office has the ultimate sanction of terminating contracts if safety is not acceptable. It can also shut down any facility not operating safely. There will also be financial sanctions to protect safety. Not only will some payments be reserved for achievement of safety targets, but a contractor is unlikely to achieve incentive payments in other areas if he fails to meet the safety requirements.

Lord Stoddart of Swindon

My Lords, will the safety criteria to be imposed on the contractors be published?

The Earl of Arran

My Lords, I am not certain whether it will be published. As has been said continually in this House and in another place, safety will be of the highest standard all the time. I shall try to let the noble Lord know before the end of the debate whether the criteria will be published.

Lord Mayhew

My Lords, the Minister will agree that safety in the production of nuclear weapons is extremely expensive. Huge sums of money are spent on contingencies which are almost certain never to happen. What will happen if there is a difference of opinion between the contractor and the Government about what is reasonable in that respect?

The Earl of Arran

My Lords, in such a situation the Government must have the last word. If the situation arises the last word will be had by my right honourable friend the Secretary of State. Safety standards are of paramount importance.

Lord Mayhew

My Lords, my point is that the contractor is in a position to claim that his contract does not permit the Government to overrule him and he can take the Government to court.

The Earl of Arran

My Lords, perhaps I may answer the point raised by the noble Lord, Lord Mayhew, at the end of the debate. The noble Lord also asked about the courts. We cannot guarantee that there will never be a court case involving the AWE contractor and the MoD. We can guarantee that we shall be able to veto his operations and if necessary sack him. Any court consequence will follow later. Similarly, we shall have financial sanctions in respect of the amount and timing of contract payments. Perhaps the contractor would wish to argue in court and perhaps he could: it would depend upon the circumstances. However, that would take time and in the meantime our financial sanctions would bite. Let no one imagine that the AWE contractor would be able to ignore our safety or other requirements.

The noble Lord, Lord Zuckerman, gave the House a most useful resume of the AWE and the changes that have taken place during the years. I can assure him that the change of status of AWE employees from Civil Service to contractor operation is no threat to the scientific and research aspects of AWE nor to the important role of the chief scientific adviser in nuclear policy matters. Furthermore, CSA remains the UK focus under the 1958 Anglo-American agreement. At the same time AWE is a Ministry of Defence procurement executive establishment. The chief of defence procurement is and remains the accounting office for defence procurement expenditure including MoD's expenditure on nuclear research production and development at AWE. There is obviously a military interest, the military being the people who will receive and deploy AWE's products. All those aspects will be taken into account in the arrangements for the contractorisation of AWE.

The noble Lord, Lord Zuckerman, expressed anxiety about the size of the compliance office. It is as yet too early to attempt to predict the eventual size of the compliance office. The optimum size and structure is one of the issues that will be considered with great care during the run-up to vesting day which will probably be in late 1992. However, I can give a categorical assurance that the office will receive the staff and resources necessary to fulfil its role effectively.

Lord Zuckerman

My Lords, the noble Earl has not fully answered my question. To whom does the compliance chief report? Where does total responsibility rest in advising the Secretary of State about all matters relating to nuclear policy? The Minister's remarks have confirmed my belief that at present the military procurement office and the scientific side are operating independently in this field.

The Earl of Arran

My Lords, that is a detailed question that I shall answer before the end of the debate if the noble Lord will be patient. My noble friend Lord Ironside asked whether the compliance office will be contractorised. The compliance director will be a senior and experienced civil servant. His staff will be Ministry of Defence civil servants. The compliance office as a body will not be contractorised but it could obtain contractor support or contractor assistance if necessary drawing on industry. Obviously that would be separate from the contractorisation of AWE.

The noble Lord, Lord Sherfield, spoke of the protection of research. I assure him that the Government fully share his desire that AWE's excellence as a research establishment must be protected. We shall draft the contract for the operation of AWE in such a way as to achieve that aim.

The noble Lord, Lord Stoddart of Swindon, was right to be concerned about security. The Government are committed to maintaining the highest standards of security at AWE. The MDP will continue at AWE after contractorisation as at present. I confirm that the Ministry of Defence will continue to be responsible for security at AWE. It will be responsible for security standards and for the vetting of AWE staff who must meet the same stringent security requirements that currently apply.

The noble Lord, Lord Stoddart, asked about radioactive waste disposal and in particular about post-contractorisation. There is no reason why contractorisation should change the arrangements and it is our intention that they should be continued. The noble Lord also spoke of his anxieties about redundancy, saying that this has happened in the past and will happen in the future. Recruitment and retention are long-standing problems at AWE and therefore no redundancies are expected. The facts are that while AWE has a continuing and high workload, the establishment has for some time been short of staff and turnover is high. The Government's commitment to the defence nuclear programme is well known. That commitment is the best guarantee of the future of AWE and its staff. However, it is likely that we shall be able to reduce the number of vacancies requiring to be filled at AWE. Instead of needing several hundred more staff we may be able to manage with roughly the same numbers as there are now and have been for some years. If we can do that without affecting AWE's work programme or safety standards, then we shall do so

Lord Stoddart of Swindon

My Lords, does the noble Earl understand that the anxiety of some of us as regards security is that there will be a different relationship? At present, because it is a government-owned establishment, it is responsible to MoD. However, when there is privatisation or contractorisation of management, that private firm may have other irons in the fire. It may manage other firms and interests. Somewhere along the line, the management and what goes on at the Atomic Weapons Establishment may come into contact with the non-security activities of such a firm. Will there be additional safeguards to ensure that there is no security leakage?

The Earl of Arran

My Lords, I give a total assurance to the noble Lord that after vesting day the safeguards which exist will be of paramount and total importance. I shall write further to the noble Lord about the details so that he fully understands the position. I accept that it is an important point.

The. noble Lord, Lord Williams, asked several questions about foreign ownership. I wish to make two points. The key point is that the company must be able to meet our security requirements. Secondly, we shall not rule out any company on grounds of nationality in itself. However, given AWE's close co-operation with the US, it is more likely that US companies will meet our rigorous security requirements than companies from other countries.

The noble Lord, Lord Zuckerman, asked about the compliance director. He will be responsible to the Secretary of State for Defence. He is already in post under the interim management arrangements at AWE. His immediate superior is the deputy controller nuclear, a very senior official in the MoD procurement executive. At present we have no plans to change that, but I emphasise that the compliance director can also draw on expertise from elsewhere.

The Government are convinced that contractor operation offers not only the best solution for AWE's current difficulties but also the soundest basis for its long term future. The Bill provides the legal framework within which the introduction of contractor operation may take place. It provides safeguards for the United Kingdom's defence interests by helping to protect national security considerations and also for AWE staff by ensuring that they will keep their existing jobs without detriment to their conditions of service when the contractor is introduced. The vigorous safeguards which will be imposed through the provisions of the contract and the close and continuous scrutiny of the establishments by MoD through 1 the compliance office will ensure that the considerable benefits of contractor operation are achieved without detriment to safety or AWE's world class reputation as a research establishment.

Lord Stoddart of Swindon

My Lords, before the noble Earl sits down, I asked about the safety criteria and whether they will be published. I understand that he may not be able to reply to that question today. If he is unable to do so, will he write to me and place a copy of the letter in the Library?

The Earl of Arran

My Lords, I willingly undertake to do that.

Lord Kennet

My Lords, before the noble Earl sits down perhaps I may throw one last question to him about the non-proliferation treaty which I should like him to answer now, if possible. Let us suppose that the Government appoint a foreign firm to manage Aldermaston and that that firm is based in a non-nuclear weapons country; perhaps Japan or Germany. How will the Government defend themselves against the charge of infringing the non-proliferation treaty which states that no nuclear weapon state may do anything to impart knowledge about nuclear weapons to, or assist in the obtaining of nuclear weapons by, any non-nuclear weapon state?

The Earl of Arran

My Lords, I believe that the noble Lord would prefer an answer to that question in writing. It is a detailed and rather technical question. I shall respond to it in writing and I shall place a copy in your Lordships' Library. I commend the Bill to the House.

On Question, Bill read a second time and committed to a Committee of the Whole House.