Royal Ordnance Factory, Patricroft (Hansard, 25 July 1983)

§ Mr. Pattie

I sent the following letter to the hon. Member on 20 JulyOver the many years in which the Royal Ordance Factories have been producing equipment for the Armed Forces and for overseas customers, and especially since they began to operate under a Trading Fund in 1974, their overall performance has been very satisfactory, and all their customers have been delighted with the service they have received. Nevertheless, the Government believe that the constraints associated with the ROF's present operations under the Trading Fund prevent them from realising their full potential. We consider that these disadvantages can best be overcome by allowing the ROFs to operate in conditions of more commercial freedom and with a relationship to the Ministry of Defence more akin to that which exists with other sectors of the defence industries. Our plans to achieve this were set out by John Nott in a statement to the House on 20th May last year. We plan to introduce legislation at an early stage this Parliament to enable the ROFs to operate under the Companies Acts rather than under the Trading Funds Act 1973. The new company will at first continue to be wholly owned by the Government but it is our intention in due course to introduce private capital into the organisation, either by direct sale to the private sector, or by joint venture, or by flotation of shares. In the meantime we are taking steps to ensure that, when vested as a Companies Act company, the ROFs will be in possession of all the facilities which will be required to ensure their commercial success. 312W Thus we have given the FOFs their own sales and marketing arm by the transfer of staff from the Ministry's Defence Sales Organisation, and we are planning to transfer further personnel and facilities to the organisation so as to give the ROF's their own capability for design, development, and applied research. We have also appointed a new Chairman and Chief Executive with wide experience of industry to prepare the ROFs for their new status and to oversee the transformation, and created new posts on the Board of Directors with responsibility for R&D and sales. When the new ROF organisation, complete with its own R&D and sales arms, is transferred to Companies Act status, it will be able to develop as a cohesive organisation during the period of continued Government ownership. It is not intended to introduce private capital until the ROFs have had time to accustom themselves to, and perform successfully in, their new and more commercial environment. Moreover, we have no preconceived notions about the methods by which private capital is to be involved, but will take our decision at the time in the light of all the factors. We certainly have no plans for wholesale closures or for passing over the ROFs for destructive asset striping. The MOD will continue to have a major requirement for the ROFs' products: we wish them to join the private sector of our defence industry as a successful going concern, able to operate competitively at home and abroad. Employment prospects at the ROFs, including ROF Patricroft, will depend, irrespective of whether they are in public or private ownership, on the length of the order book and sales prospects. Our programme for the ROFs is aimed at allowing them to diversify their product range and thereby optimise their sales prospects and order book, and with them the level of employment. In the last analysis the prosperity of the ROF's depends on their management and work force: if they can work together and continue to produce high quality, competitive products they will have nothing to fear from privatisation. Turning to the effect of privatisation on the conditions of service of ROF employees, your constituent will know that we have already informed the Trades Unions in a consultative document issued last Autumn that it is the Government's intention that the transfer shall not result in a worsening in terms and conditions of service, taken as a whole, which employees enjoy at that time. We are now embarking on substantive discussions with the Trades Unions on the implications for their members of the transfer of status. It remains the Government's firm conviction that the interests of both the ROFs and the Services will, in the long run, be best served by allowing the ROFs the freedom to operate in a more commercal manner than hitherto and eventually in the private sector. I am confident that this approach offers by far the best opportunities for the ROF organisations, its employees and its customers both in the UK and abroad.