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Madam Deputy Speaker : Before I call the next hon. Member, may I point out that many hon. Members are seeking to catch my eye and it would be appreciated if those who are called to speak would keep their contributions as brief as possible.
8.40 pm
Mr. Malcolm Bruce (Gordon) : I am sure that the hon. Member for Chelmsford (Mr. Burns) is worried about his constituents, but his message is a little confused and contradictory. He began by saying how concerned he was about how many people in the defence industry were out of work, but concluded by saying that everything appeared to be going well. The two comments cannot be squared. He also appeared to denounce any new Government help but then welcomed a number of existing Government initiatives.
We must recognise the reality of the situation, a point mentioned by many hon. Members. We all make party political points about who will cut defence spending most--that is easy--but we must accept the facts. In 1984-85, spending on defence amounted to £26.3 billion ; education spending was £24.9 billion, health spending £25.3 billion and social security spending £60.6 billion. In the last complete year, defence spending was down to £22.8
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billion, education spending was up to £31 billion, spending on health amounted to £33.2 billion and spending on social security £75.9 billion. That is the reality of the cuts that have been imposed. Most people working in the defence industry are more interested in the current climate than in the threats of the Opposition, who, after all, did not win the election. The consequences of the cuts are that there has been real pain. I always enjoy the speeches of the Minister of State for Defence Procurement. He said that he was surprised at his promotion, but I was not. We have debated a number of issues, and I believe that his promotion was well deserved, although he may be rather surprised at where he has ended up. He dealt constructively with a number of the issues that have been raised, but he must recognise that the cuts mean that orders are not reduced, which has repercussions for an important sector of our manufacturing industry and for the highly skilled people who work in it.The trigger for this debate has been the crisis at Swan Hunter as a result of the placing of a recent order. I shall deal briefly with that issue and then make some more general comments.
Mr. Richards : Will the hon. Gentleman give way?
Mr. Bruce : No, I shall respond to the constraints of the Chair. I know that there is not a 10-minute limit, but I must press on. The Minister and the hon. Member for South Shields (Dr. Clark) have made it quite clear that when there is a discrepancy of £70 million in a bid there is no question of choice. As someone who stood a little apart, I wondered why, given the scale of Swan Hunter's failure to make a competitive bid, expectations had run so high. What made Swan Hunter believe that it was close to winning the order? Was it a mistake on its part in wholly misreading the runes or misunderstanding the signals, or were there factors at play which it did not appreciate or of which it was not aware?
I welcome the fact that the National Audit Office has said that it will investigate. It will be no consolation after the event, but the investigation might come up with an answer. The Minister said that the Government would make the relevant information available, which is constructive.
Several questions arise from the placing of the order. The Minister said that the Government were not surprised by VSEL's bid but that they were surprised by the size of Swan Hunter's bid. That at least moves on the question that my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) asked in the House the other day. He wondered whether there was any sign that Swan Hunter had been encouraged or advised to include a wider spread of overheads and costs in its bid whereas VSEL was able to offset some of those costs because it had the benefit of previous contracts. I know that the Minister cannot answer that question directly, although he seemed to imply that that was not his understanding of the case.
We are given to understand that, although the two designs were similar, given the difference in price the guts must have been different, whatever they looked like. Alternatively, one must conclude that Swan Hunter was shooting in the dark at what it thought were the Ministry's expectations. Such questions need to be asked, and we shall no doubt hear more about them in due course.
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Another issue that arises, not only in relation to Swan Hunter, is the Ministry of Defence's apparent slowness to pay. Apparently, £20 million is due to Swan Hunter. That may not have forced it into receivership--losing the contract was perhaps the final straw--but £20 million is a considerable sum for a company to be owed by the Government. It has often been said in the House that, of all organisations within our economy, the Government should set an example of prompt payment. It does not help British industry to know that they are setting a bad example.If we are to run down our defence manufacturing base, will we have a strategic overview at the Ministry of Defence or the Department of Trade and Industry--or preferably the two together--as to what that base should be? That point is mentioned in the amendment that I and my right hon. and hon. Friends have tabled to the motion. We believe that the Government should accept that, although we cannot retain our capacity at the previous level if the requirements are not the same, we cannot allow the vagaries of the outcome of a bid at a particular time to determine what our future capacity is likely to be. Do we, in the national interest, need the capability that exists at Swan Hunter? Does it matter, not to the people of the north-east to whom it clearly matters a great deal, but to the nation as a whole if we lose Swan Hunter? The Government do not appear to have considered that aspect. Some of us would have a little more confidence in the forward thinking of the Government's management of the defence base if there were evidence that it was being considered.
If it was concluded that a certain capacity was required, we should have more confidence if a strategy were then determined to ensure that that capacity was maintained. That is why we have suggested a 10-year review of procurement contracts. I accept that that may be regarded as a long-term view, but it would be proof that the Government were considering not only the Ministry of Defence's requirements but the industrial base to supply them over a reasonable time. I hope that Ministers will be able to tell us whether that is being considered.
The motion mentions diversification, to which the hon. Member for Chelmsford also referred. Point scoring apart, there is general agreement that our defence base has contracted and that further contraction is likely. On the positive side, we must accept that within our defence capability there is a great deal of skill and technology and a resource that should not readily be dispersed. It is said that 45 per cent. of all Britain's research and development expenditure goes on defence.
If we remove that from the economy and do not seek ways of replacing it, our research and development base will fall alarmingly in comparison to that of our major competitors, and our ability to maintain--or even achieve --a competitive edge will be seriously undermined. I accept that the Ministry of Defence may say that that is not its responsibility, but it certainly is the responsibility of the Department of Trade and Industry to calculate the consequences of the rundown in research and development.
It is fine to do as the Minister and other hon. Members did and cite examples of the successes of companies that have managed to diversify or to redeploy, but those are often large companies that have been able to take time to readjust. Other companies do not have the ability to respond as quickly, and for every success story there are
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stories of other companies that have not been able to move far enough or fast enough, either to stay in business at all, or to maintain anything like the size of their previous operations. For many companies it is wholly unrealistic to say that they should expand their research and development activities so as to move into new areas at a time when their market is contracting dramatically. Private and City investors are likely to be a little sceptical about such a sudden switch, and about companies' ability to respond. Of course, some companies will be able to cope, but it is cavalier of the Government to dismiss out of hand the idea of agencies to assist companies that cannot adjust, or that require a little time. Yet it was the Minister who accused the Opposition of taking a cavalier attitude.It is also important to realise that, however concerned we are to focus on the impact on the people of Tyneside of a disaster such as the Swan Hunter closure--there has been a catalogue of such events, and people understand what effect taking a major, long-established employer out of the heart of a community has on morale--the fact remains that the cut in defence expenditure affects almost every part of the United Kingdom economy.
The Minister said that more than 400 companies were regarded as major defence contractors, and my hon. Friend the Member for Bath (Mr. Foster) has given me a letter that takes the argument one stage further. A company in his constituency, Horstman Defence Systems Ltd., had a £300,000 order with Swan Hunter, and it looks like losing the outstanding balance of that, which amounts to £141,000. That company is probably not one of the 400-plus that the Minister identified, so we see the knock-on effect of the failure of a company such as Swan Hunter. There are signs that defence contractors in Scotland, in Wales and in the far south of England are affected, and we must recognise that many of those companies cannot respond quickly. In my constituency we have a considerable number of high- technology companies engaged in the offshore oil and gas industry. The Department of Trade and Industry should take on board the fact that that industry is volatile ; it goes up and down ; confidence ebbs and flows, and activity increases and decreases. In the mid-1980s, there was a sharp downturn in North sea activity as the oil price fell. In order to protect their future and ensure that their market, was more broadly based, many of the high-technology companies diversified into--yes, defence contracting. They believed that they had developed on the civil side technology that had a military application, for which they could develop a comparable market. Just as they have managed to penetrate that market, it is undergoing a savage contraction.
The Government should consider whether there are any areas in which they could provide a legitimate stimulus, particularly for research and development and for high technology, to ensure that neither the peaceful nor the military applications of the technology are lost because of the sharp contraction in the market.
It has been pointed out to me that we probably have a smaller marine offshore research programme than do most of our major European competitors. France certainly spends a lot more money on marine and offshore research and development, and Germany probably does, too. That
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is a shame, in view of our status as an island nation. We ought to be leading the research and development technology for offshore activity, which, I may say, runs well with our naval expertise. I should like the Minister to consider whether initiatives could be taken jointly by the Department of Trade and Industry and the Ministry of Defence to ensure that the technical expertise and capacity that we have developed in our defence and other high-tech industries are not lost simply because we have had to undergo a contraction that both sides of the House accept is necessary. I urge the Government to take that idea seriously. If they do not, we may find that, in five or 10 years' time, our already weak high-tech capacity is further weakened because a public spending decision was taken without a full assessment of the implications for our trading and industrial base. I am glad that Ministers from both the DTI and the MOD are here, because it is proper that there should be a joint approach. I urge those two Departments to get together and to give us a loood) : Like other hon. Members, I regret that the debate should have to take place against the sombre backdrop of the awful news about Swan Hunter. I should have much preferred a two-day defence debate to take place long since, in which our overall defence equipment and procurement strategy could have been discussed within the general context of defence policy as a whole. Nevertheless, we must accept facts as they are and make the best of them.At the outset I must declare two interests. One is political, inasmuch as I have the privilege of being on a postgraduate parliamentary industrial fellowship with TI plc, of which Dowty, TI Aerospace, is involved in military business. Secondly, I am a parliamentary adviser to Thorn EMI, which is an important defence contractor.
We shall face a growing squeeze on defence equipment procurement. I suspect that the Ministry of Defence now has the greatest difficulty in concluding its long-term costings and I know that many important programmes are under the severest critical scrutiny. Over the past eight years, the proportion of the defence budget allocated to defence equipment procurement has declined. In 1984-85, the proportion was 45.8 per cent., whereas in 1992-93 --the most recent financial year for which I have figures from the Ministry of Defence--it was down to 37.3 per cent. The biggest annual drop, of 2.2 per cent., came between 1991-92 and 1992-93.
It is not surprising, therefore, that there should have been such severe redundancies. The human suffering which has been consequential upon the rundown of our defence industries has been marked, and has been felt not just on Tyneside but right across the country. It has been extremely severe in the south-east, with Rolls-Royce shedding workers at its small engine division at Leavesden, with British Aerospace losing workers from Kingston, Stevenage and Hatfield, and with job losses at Marconi and Thorn EMI. Thousands and thousands of extremely well qualified, dedicated people have lost their jobs and many communities have been hit very hard.
We must also recognise that, with our armed forces decreasing in number, it is more important than ever that we compensate for those reduced numbers by securing the
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very best equipment that money can buy-- within reason, of course, because a balance has to be struck between quantity and quality. If we go overboard in trying to avoid gold-plating, there will be dangers of the kind that became evident in the Falklands war. The type 21 frigates, built cheap and light, were extremely vulnerable : the aluminium decks burned and the vessels were not as effective as we had hoped. We all remember the awful scenes of HMS Ardent burning in Carlos water.It is erroneous to suggest that one can lightly forgo naval construction standards in respect of amphibious vessels. The House will remember what happened to Atlantic Conveyor as it carried our helicopters to the scene of the action--we lost most of our Chinooks when Atlantic Conveyor went down-- and what happened off Bluff Cove, when the LSL Sir Galahad was attacked. Both vessels were subject to enemy air action.
To say that we need not worry too much about the standards of construction of the LPHs because there will be destroyer screens and so on is to overlook the fact that probably the greatest threat, apart from the submarine threat, will be from enemy air attack, often with stand-off weapons delivered at very great range. I understand why the Government have pursued the path that they have and why VSEL's consortium approach with Kvaerner Govan has found favour, but we must be careful when we seek always to go for the cheapest option.
As I said, the Government face many calls upon their equipment procurement budget. In the past year and a half or so, they have to their credit announced go-aheads for the Merlin helicopter, Challenger 2 tanks, Warrior APCs, Firefly trainers and the advanced short-range air-to-air missile, ASRAAM, among other programmes but there are many pressing projects which merit a go-ahead : the new transport aircraft, either to follow on from the Hercules--the C130J--or the future large aircraft ; the support helicopters that the Royal Air Force so badly needs ; the attack helicopters for the Army and, I trust, the Royal Marines ; multiple-launch rocket system 3 for our Army ; in air-launched stand-off weaponry, the tactical air-to-surface missile and COSM, one nuclear, one conventional ; a medium surface to-air missile ; and long-range TRIGAT--the third-generation anti-tank guided weapons system. All those projects are bearing down upon a defence budget that is reducing constantly. If we are to have properly equipped armed forces and defence industries that will be able to secure long-term employment for their dedicated work forces and continue to win good orders, it will be very important to modify our defence policies to make those resources available. I would advocate greater use of reserves and a steady programme of withdrawal from Germany, if and when the Russians come out of the eastern part of that country. I do not believe that we can afford from any point of view to run down our defence industries further.
I wish to refer specifically to the Navy, which I know is dear to your heart, Madam Deputy Speaker, and which is of great concern to the House. We should not forget that the Navy will have to acquire not only the new LPH but two new LPDs. Those are the sort of vessels that Swan Hunter had an almost unique capability to build. Swan's is the one yard that can build everything from CVSs--aircraft carriers--to corvettes. I know the yard well. My company had the privilege of having it briefly as a client. I know the management team, which has devoted its
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livelihood to achieving the management buy- out. I know the work force and the dedication and skill which it has offered to the nation.I recognise that Swan Hunter ships are regarded as the best in the Royal Navy. No one has supported them through thick and thin, and with greater dedication, greater conviction or more impressively than my hon. Friend the Member for Tynemouth (Mr. Trotter). In the last Navy debate, I was proud to say that I knew of no hon. Member with greater expertise of the naval construction industry than he. I hope and trust that we will be able to rescue shipbuilding capability on the Tyne. We need it. The Horizon 2000 programme of anti-aircraft frigates must go ahead and eventually we will have to replace our existing Invincible class of aircraft carriers. We will also need more type 23s.
What lessons do I draw from this? I suggest that we need to be more open. I see no reason why we should not have open tendering, as in the United States, for major defence orders. I have said that before, I have written about it in books and I will continue to say it. If we keep these matters under a wrap of secrecy, it does no one any good ; it simply arouses suspicions. The congressional system in the United States allows the relevant committee to have an appropriations function and there is proper democratic oversight and scrutiny. I regret to say that we do not have it in this place. At least the Americans have been able, through their congressional support, to maintain AV8A and AV8B--the Harriers I and II--in service with the United States marine corps which would not otherwise have happened. In addition, the V22 Osprey continues thanks to congres-sional support. We do ourselves a disservice by being as secretive as we are.
There is a disparity of £72 million. I have the actual figures and I will not embarrass my hon. Friend the Minister by repeating them. I will study the National Audit Office report with great interest as I have the real figures for VSEL and for Swan Hunter on both bids. I suspect that the disparity arises from the huge profits that VSEL obtained from the Trident programme. The profits allowed it to pare its overheads. The factors include the differences in construction and the advice that Swan Hunter received from third parties which it hoped would be a party to the programme if the LPH went ahead on the Tyne. There are many factors and they will be revealed by the NAO. However, in respect of the procurement business, I hope that we will learn the need for open tendering, for proper accountability to the House, for regular defence debates and for a defence procurement strategy that meets the problem of the hour, which is a declining defence budget in real terms with personnel costs that are not reducing and, ultimately, a need to develop a European dimension with the assumption by the Western European Union of the old function of the Independent European Programme Group.
I welcome this timely debate. I cannot support the defence diversification agency as I do not believe that it would do the job that the Opposition believe that it will. However, I hope and pray that my colleagues on the Government Front Bench can obtain the funds from the Treasury which our national defence needs and which our defence industry requires.
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9.7 pmMr. David Jamieson (Plymouth, Devonport) : I am pleased to catch your eye tonight, Madam Deputy Speaker, because this subject is a matter of mutual interest to you and me as Plymouth representatives. I would like to move the debate a little further south and perhaps a little towards the west. Other than from my hon. Friend the Member for South Shields (Dr. Clark), we have heard nothing tonight about Plymouth and the south-west of England.
The south-west of England is the most defence-dependent area of Britain. In 1991, it was estimated that there were 187,000 defence-related jobs in the south-west. That is approximately one in 10 of the total work force.
I have made the point in the House before that Devonport was created for the needs of the Navy. The people came after the Navy. Since King William established the dockyard in 1691, it has had 302 years of service. In addition to defence-related jobs, Plymouth has a large number of service personnel.
It is worth stating in this debate that many people in Plymouth and the south-west have given their lives in conflicts during this century and in the years before it. I am bound to say that many civilians, too, who have worked in defence-related industries have given their lives. I draw testimony from the many widows whose husbands died from working with asbestos in the royal dockyards years ago.
We have lost thousands of jobs in the Devonport dockyard. Many thousands of jobs have been lost in other industries as well. Now we are seeing service personnel in our area lose their jobs. Our motion calls for action to save people who have served their country in one capacity or another from the humiliation of unemployment and the economic scrap heap. Many people who previously worked or currently work in the Devonport dockyard will be saying that Britain must now come to the aid of those who have come to the aid of Britain. As has been said, Opposition Members accept the need for change. The defence industry, like other industries, must move with the times. Indeed, Devonport dockyard has distinguished itself in recent years by its ability to change, to adapt, to modernise and to diversify into other sectors in which it hitherto did not operate. Unlike the Government, we do not accept that the change in defence needs should automatically mean mass unemployment, skills lost to the economy, and the economic devastation of whole areas to Britain. I recall the Conservative election promise before the election, which is now looking extremely hollow. I remember that the Conservative party said at the time that Labour's policies would lead to huge job losses in the defence industry. Conservative Members said that defence jobs were safe in their hands. The 8,000 people who have lost their jobs in the Devonport dockyard in the past five years will be asking whose fault it was that they lost their jobs. At the time they had a Tory city council, Tory Devon county council and a Tory Government. It was not the fault of the Labour party.
Since then, the people of Plymouth have had the good sense to realise that they have been betrayed by the Government and now they have a Labour city council. There are more Labour Members on Devonport county
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council than Conservatives. Given the chance at the next general election, the south-west will make sure that it has more than one Labour representative.We have heard some of the reasons why diversification must take place. I would like to consider a range of Ministry of Defence activities in which diversification is needed, not just within the direct defence industries. It is not just a matter of the dockyard. In the 12 months since the election--since we were told that defence jobs would be safe in the hands of the Conservatives--we have had a drip-feed of disaster in Plymouth. The Royal Naval armaments depot in Ernesettle in my constituency is absolutely vital to the back-up work of servicing weapons. We are told now that there is a projected loss of 400 jobs in that establishment.
The Royal Naval engineering college, in which you, Madam Deputy Speaker, have taken great personal interest, and which is in Manadon in my constituency, is the Navy's only university. For more than 50 years it has had a distinguished record of producing engineering graduates of the very highest quality for the Navy. It undertakes postgraduate work that is unavailable elsewhere, serving navies throughout the world, yet we hear that a decision will be made shortly to close the Royal Naval engineering colleges, with a loss of about 300 local jobs. There has been no consultation and no thought of how those jobs might be used in the future.
We have in my constituency the Goshen Yard training school which at one time trained up to 700 engineering apprentices for the dockyard. It is currently run by a company owned by the college of further education in Devonport called Devonport Training for Quality. Now there are just a handful of students in that building. It is unique in the south-west and it contains facilities of huge potential value to other businesses and industry in the region.
Recently, British Rail and South West Water, among other large concerns in the region, have been showing great interest in the training available at the Goschen Yard school. How has the Ministry of Defence reacted to that? Negotiations between Devonport Training for Quality and the Ministry of Defence have been drifting for months. Through sheer frustration, the company has had to impose a deadline of the end of June for the achievement of a long-term lease of the premises.
If negotiations fail, the company will move to other, less suitable premises and the school--with its unique facilities--will be lost to the economy of Plymouth. I ask the Minister to act to ensure that Devonport Training for Quality has a long lease on the premises, to enable vital training work to continue.
Our dockyard in Devonport employs just over 5,000 people ; five years ago, it employed 13,500. Its future now hangs on the decision on the Trident nuclear refit contract. The Minister may recall the Secretary of State for Defence saying, in a BBC television programme on 19 August last year :
"the decision will be made before Christmas."
Perhaps he can enlighten the House about which Christmas he had in mind.
So concerned were Ministers to secure a decision, as a matter of urgency, that the Minister of State for the Armed Forces--who was present earlier-- said on 12 January that he hoped to "make an announcement shortly". That urgency was reflected in last night's Adjournment debate,
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when the Minister of State for Defence Procurement was so gripped by anxiety for a swift decision that he regretted that the process had taken"longer than I had hoped."--[ Official Report, 18 May 1993 ; Vol. 225, c. 222.]
This important decision--important, that is, to Plymouth and the south-west and to Scotland--has been subjected to procrastination, fumbling and delay by a Government who have nothing as urgent as "manana" in their lexicon. People in the south-west are asking, "Where is the planning? Where is the strategy? Who is driving the defence changes--the Ministry of Defence or the Treasury?" The thousands who have lost their jobs and the many thousands of loyal workers whose jobs are threatened have the right to an answer. The Government's defence policy in regard to jobs is in tatters. Even on such important matters as surplus MOD housing, the Government dither while houses are vandalised. Around the country, the Ministry now has 9,291 empty properties, 527 of them in Plymouth--21 per cent. of the total. What has been Ministers' response over the past five years?
Hon. Members on both sides of the House have asked questions. On 24 October 1988, we were told :
"Over the next 12 months it is expected that 164 will be offered for sale sold on the open market."--[ Official Report, 24 October 1988 ; Vol. 139, c. 62.]
On 11 May, we were told :
"Many of the vacant properties are undergoing modernisation others are being prepared for disposal."--[ Official Report, 11 May 1989 ; Vol. 152, c. 522. ]
The latest answer in this catalogue is the one that I received on 4 May :
"to ensure the early reuse of the dwellings arrangements are now in hand to sell the estate on the open market."--[ Official Report, 4 May 1993 ; Vol. 224, c. 20. ]
The Government have certainly proved that procrastination is the art of keeping up with yesterday.
Earlier this evening, the Minister quoted Aneurin Bevan ; I hope that he will forgive me if I quote Winston Churchill--not the rather troublesome Winston Churchill who often sits across from me in the Chamber, but one from an earlier era. He said :
"They are decided only to be undecided, resolved to be irresolute, adamant for drift, all-powerful for impotence."
Plymouth and the south-west have great potential. The people have many skills ; the city council is helping to provide an environment in which new enterprise can flourish and new ideas can develop. However, we desperately need the planning and co-ordination that a diversification agency could bring. At present, the south-west is like a sinking ship with Ministers throwing men overboard without supplying lifeboats. That is why I urge hon. Members to vote for our motion.
9.19 pm
Mr. Neville Trotter (Tynemouth) : The House will not be surprised to hear that I intend to concentrate on the disastrous consequences that have flowed from Swan Hunter not winning the order for the landing platform helicopter carrier, followed by the immediate collapse of that esteemed and proud company. All hon. Members can understand the effect of that awful news on Tyneside.
Swan Hunter had already slimmed to a shadow of its former self but was still a major employer and a proud part of our traditional industrial scene. It is a company of which all on Tyneside have been justly proud for many years. It has a record that is second to none in its
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performance in turning out magnificent ships for the Royal Navy, including ships with no defects whatever--senior admirals have told me that that is almost impossible to achieve.We meet for this debate tonight under a great cloud of sadness at the news that Swan Hunter lost the order. It has closed its doors under its present ownership and a receiver has been appointed. The House will appreciate how our local community has been hit hard in its mind, its soul and its prospects by this tragic news. Every effort must be made to create alternative economic activity in Wallsend and on Tyneside. We have reason to be hopeful because we have a good record in the north-east of inward investment from abroad. We have experienced regional agencies--there are none better in the United Kingdom--for attracting and using to the utmost the tools that are available for the creation of new employment and new industry. I welcome the new enterprise zone. Such zones have proved successful in other parts of the country and we are determined that the enterprise zone will prove successful for the people of Tyneside, too. We have the assurance of continued regional assistance status which will be helpful to the whole area. Of course, our principal asset is our excellent local labour force.
My main aim tonight is to concentrate on the future of Swan Hunter. In the light of some of the comments made earlier, I shall refer to its recent history for a moment. First, I pay tribute to the yard's great achievements. It has built ships of the highest quality and concentrated recently on warships. The yard tried ceaselessly to obtain export orders-- an enormous amount of effort has gone in that direction. Sadly, there was no prospect of success until recently, although ironically at the last minute there was hope of obtaining an order for two ships for Oman. Even in the present circumstances, I hope that it will be possible for Swan Hunter to build those two Omani ships.
I must remind the House that Swan Hunter is still continuing to operate at present, and it would be very good news if it could build those two ships. We are talking about a yard with the highest standard of technology and a first-class design facility which is not bettered anywhere in the country or--I would like to think--in the shipbuilding world.
Recently there has been a steady slimming of the Swan Hunter labour force. I found it interesting to be reminded of these figures. In 1981, there were well over 9,000 people working at Swan Hunter. The number fell steadily over the years to 7,000 in 1984, 4,000 in 1985, then 3,000 and now 2,200 today. Recently, there have been a number of sad blows. We lost the last frigate order. Sadly, we were not second in the competition--we were third. That shows the tremendous competitive pressures in the warship building industry. It is perfectly legitimate for the House to consider whether the possible end of warship building at Swan Hunter unfortunately limits the competition for the future. That negative effect should be borne in mind when we contemplate the ultimate future of Swan Hunter as a warship building unit.
Swan Hunter diversified into building the Antarctic survey vessel. I understand that a large loss was made on building this superb ship, but I do not know the reason for that. Latterly, the yard ran into severe financial difficulties that had been the case for some months. At
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the end, it was hanging on by its financial fingernails from day to day. It was entirely dependent on that one order, which we all hoped that Swan Hunter would win.I do not know what the Vickers figures were, but I have been told the Swan Hunter figures. The initial bid was £174 million. I trust that my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) can confirm that figure. The £174 million rose to £210 million. I am sure that my hon. Friend agrees with my figures. I was alarmed when the final bid was increased by £36 million. A question was asked earlier about when the final bid went in. I believe that it happened on 22 April.
It is unfortunate in any bidding process to add a figure of that size to one's bid at the final stage. When the National Audit Office report comes out I shall read with interest the circumstances which required that huge increase in the bid. I fear that it may well have been the final straw.
Mr. Wilkinson : My hon. Friend is enlightening the House on important matters. He is right that the first bid was £174 million. The final bid from Swan Hunter was £210 million, but it was revised upwards to £230 million. There is a suggestion--it may be contradicted --that Ministry of Defence officials were not averse to that upward adjustment. I do not know whether that is true. My hon. Friend may be able to elucidate. However, it was instructive and interesting that from the first to the second bid the VSEL-Kvaerner bid went down, not up.
Mr. Trotter : It is a feature of commercial haggling that one tends to bring one's price down at the final stage to secure the contract. That is why I have in my mind the question about how Swan Hunter was ill advised, required or forced, perhaps by financial pressures--we shall know in due course when the auditor reports--to make an enormous increase of 30 or 40 per cent. in its original bid. I have been given the figure of £210 million as the final bid that was entered. I was amazed when I heard about the incredibly large difference. Of course there is always a loser and a winner. There is always a difference. But a difference on this scale seemed beyond normal experience. I asked my right hon. Friend the Minister whether I could talk to the Controller of the Navy and he was good enough to agree to that. I received assurances, one of which I relayed to the House this evening, from the controller. His basic assurances were that both yards had been asked to design for the same requirements, and that the Navy was perfectly satisfied with the ship that it was getting. When I asked him about the price, he said that it was in line with the original estimate of the cost to the Navy.
It was not sufficient on an issue of this enormous significance and effect on Tyneside that an individual Member of Parliament should have simply an assurance from the Controller. The Controller is a most honourable man whom I have known and respected for many years. He gave me answers to my questions. It seemed to me that the issue was so great that a formal independent inquiry was required. That is what the directors of Swan Hunter requested.
Therefore, I contacted my hon. Friend the Member for Upminster (Sir N. Bonsor), the Chairman of the Defence Select Committee. He accepted that an emergency meeting
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should be held. At that meeting, the members of the Committee, including myself, agreed that an inquiry should be undertaken. We were prepared to undertake the inquiry ourselves if the NAO did not accept our invitation.It is in everyone's interest that the NAO has accepted the invitation. It is the best qualified body to undertake the inquiry. It has the power to send for all information and all persons. It has expert staff to carry out the inquiry. I know that the whole House and certainly the whole of Tyneside will await its ultimate conclusions with the greatest of interest.
In the light of some of the comments made earlier tonight, it is fitting to say that I am convinced that the ship would never have been built if we had had a Labour Government. There is no doubt in my mind about that. Only a few months ago, the Labour party voted overwhelmingly for a cut of £6 billion or £7 billion a year in defence spending. That is equivalent to the whole cost of the Royal Navy, and about four times what we spend each year on the purchase of ships for the Navy.
The most important matter that I wish to draw to the attention of the House is the immediate and critical decision that the three frigates being built on the Tyne should be completed there. That is essential to the ongoing future of the great skill centre at Swan Hunter. If there is to be any future for that firm, it is essential that those frigates be built there. Yesterday afternoon, I saw my right hon. Friend the Prime Minister in connection with this matter, and I noted his words :
"I share the concern of you and everyone on Tyneside that Swan Hunter should be able to complete the type 23 frigates if at all possible. We have that aim very much in mind in our current discussions with the receiver."
I hope that those discussions will be speedy. I understand the complexity of what is involved in renegotiating from the start, but it is essential that the uncertainty on Tyneside be brought to an end as soon as possible. I believe that we can finish those ships to our normal high standards and specifications, and at a better cost than could be achieved by their removal to any other place. I need hardly stress the significance to Tyneside of this decision. The future of Swan Hunter and of its new owners depends entirely on it. There has been some reference to a takeover of Swan Hunter. It was quite clear that the company could not have continued independently, even if it had obtained the LPH order. Heads of agreement between Swan Hunter and GEC had been signed. If the order had gone to Swan Hunter, GEC would immediately have taken the company over and would presumably have put in the cash that was needed to keep it going. I hope that, even in the present circumstances, we shall still see such a move. GEC is one of our great companies. It has intimate knowledge of the background of the technology and of every other feature of Swan Hunter. It has been through all aspects of the business. I am told by the receiver that there has been an encouraging number of inquiries about the future of the yard. He can be assured that all hon. Members will give him every possible assistance as he seeks to provide further activity to ensure a future for Swan Hunter. This is a matter of the greatest concern to the people of Tyneside.
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9.32 pmMr. Stephen Byers (Wallsend) : In the very brief time available to me I do not want to dwell on the events of last week, but I have to say that the concern that people on Tyneside feel about the way in which the LPH contract was awarded has not been lessened by today's admission of Kvaerner Govan's commercial director, David Smith, that his company tendered for a commercial ship, not a naval vessel. The fact that an LPH carrying Royal Marines into trouble spots will have been built to the same specifications as a passenger ferry must cause great concern among many hon. Members.
Mr. Davidson : Will my hon. Friend give way?
Mr. Byers : As I have only two minutes, I cannot give way. The sequence of events last week has galvanised the community on Tyneside around a very simple campaiard, it is imperative that we retain the design team. We must retain the technical expertise at Swan Hunter. There must be no steps to declare any of those people redundant until all the options and all the potential buyers have been investigated.
Secondly, the order for the three type 23 frigates, on which work is continuing as normal, must be guaranteed by the Ministry of Defence. Assurances from Ministers--even from the Prime Minister--that the Government will use their best endeavours are not enough ; the work must be guaranteed within the next few days.
Thirdly, we know that there are other Ministry of Defence orders in the programme. These should be brought forward as a matter of urgency. Those orders include refits on three landing ships, an AOR3 and a batch of new type 23 frigates. There must be access to intervention funding so that there can be diversification in future into the merchant sector. Help must be given with export orders. A tender went in last Friday for a contract in Oman. I hope that the Government will give all possible assistance to efforts to secure that tender.
Mr. Aitken : We are in touch with the Omani authorities and have been trying to be as helpful as possible to Swan Hunter in receivership.
Mr. Byers : I am grateful for those comments.
Tyneside is not using special pleading, but asking for fair play. Shipbuilding is vital to the manufacturing and industrial base of Tyneside. If the Government thought that the people of Tyneside would sit back and let shipbuilding die, they made a grave error. The survival of shipbuilding is vital to provide jobs for the present and a future for our children. With political will, our objectives can be achieved. The country will be waiting to see what action the Government will take to retain shipbuilding on Tyneside.
9.36 pm
Mr. Derek Fatchett (Leeds, Central) : Naturally, much of tonight's debate has centred on the problems facing Swan Hunter and what a number of my hon. Friends have described as the human and commercial tragedy in Tyneside. The sad fact is that, while Swan Hunter makes an immediate focus for tonight's debate, over the past two
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