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or three years there has been a catalogue of defence companies in all regions that have faced exactly the same problems as Swan Hunter.The list of companies is not a catalogue of doom and gloom, but is crucial in relation to the argument. It contains Swan Hunter, Cammell Laird, VSEL at Barrow--which has lost substantial numbers of jobs even though it won the recent contract--British Aerospace at Kingston upon Thames, British Aerospace in Lancashire, British Aerospace dynamics division in Bristol, Rolls Royce military engines division in Bristol, British Aerospace in Stevenage, GEC Avionics in Kent, the royal ordnance factories in Nottingham and Vickers in Leeds. All those companies have experienced substantial job losses.
Mr. Richards : Will the hon. Gentleman give way?
Mr. Fatchett : No, because we are short of time and we have already heard an intervention from the hon. Gentleman.
The crucial point about each of those companies is that the change in job structure and employment opportunities has not occurred as a result of technological changes as the Minister argued, but as a result of changes in the market place.
The Minister claimed that the Labour party--it could also be said of the Liberals--was trying to advance the argument that the defence industry was "tottering towards the grave". Nothing could be further from the truth. My hon. Friend the Member for South Shields (Dr. Clark) recognised the success, importance, achievements, technology and skills of many of those companies. The Opposition do not want to run down the industries, but advance an argument to show the problems that those companies face in the marketplace.
The list of companies is strategically important to the British industrial base for a variety of reasons, including the fact that a major skills base exists in our defence-related industries, which contain many of our best trained employees. The same is true of shipbuilding and aerospace. I saw a comment last week--I think made by the Minister with responsibility for industry--that some of the arguments in relation to Swan Hunter sounded like those of the 1970s. The Minister is out of touch with the substantial technological changes that have taken place in shipbuilding and does not understand the high level of technology and skills involved in that industry. When British Aerospace announced 2,000 redundancies at its Kingston plant, according to a survey by the local training and enterprise council 45 per cent. of the laid-off workers were professional and technical staff and another 20 per cent. were skilled craft workers--all of them crucial to the country. Such workers are leaving manufacturing industry because they feel that their skills have been undervalued and their jobs made insecure. I fear that many of them are going into the service industries. So we are losing skills into which a great deal of investment has gone for a number of years. We need those skills for our future industrial performance.
The research and development base is crucial not just to the defence industries but to the spin-offs in the civilian sector. These companies make large investments, often with Government money and often in Government -sponsored research or collaboration projects. If we take
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away this base the country will be left lagging behind in R and D and falling even further behind in its ability to compete with Europe.According to a recent European Commission report, Britain has the second most defence-dependent economy in the EC after France. My hon. Friend the Member for Bolton, South-East (Mr. Young) and the hon. Members for Chelmsford (Mr. Burns) and for Gordon (Mr. Bruce) all arrived at the same conclusion : defence companies must now operate in a changed framework. The collapse of the Soviet Union was an important part of that change. Recalling the defence debates of a few years ago, we may note that the whole object of Conservative defence expenditure was directed at the Soviet Union. I had hoped that the Conservative Members who used that argument would plan for the future. It seems that they now recognise that the Soviet Union has collapsed and that the framework has changed.
Putting aside all petty party political points, the Minister told us--he does not appear to have got the point across to his own Back Benchers--that the Government plan to cut defence expenditure by 9 per cent. in the next three years. Speakers from all parties have agreed on that changed framework.
What do the Government believe they should do in these circumstances? We all recognise the importance of the defence companies, skills and R and D. The crisis encompasses not only our defence capacity but our whole industrial base. The Government's answer is, "Don't bother us ; don't ring us ; leave it all to the marketplace." We know what happens in the marketplace. The market has been deliberately shrunk by Government action. Our Government and other Governments have reduced their defence budgets.
If we leave the defence industries to the marketplace, it will be a case of Swan Hunter today, other companies tomorrow. The list will continue to grow. The Government are washing their hands of their responsibility. Typically, Conservative Members blame the Government, but will do nothing about the problem.
Defence-related companies have not in any case operated in a free market. They have depended on Government action in all sorts of ways. They have depended on the Government for domestic defence procurement. They have enjoyed what one might term an agreed market, owing to Government action. They have had significant Government funding for research and development and significant Government help with exports. The Government have clearly been involved in the overseas orders won by Britain's defence companies.
The market is not free, because there is direct Government intervention. The Government propose to wash their hands of companies whose success and viability depended on Government intervention, and they are doing that just when those companies need their help. Some hon. Members, including the hon. Member for Chelmsford were absolutely right when they said that we should take a strategic view. But we all know that markets cannot take a strategic view : they cannot plan ahead. The Government are abdicating their
responsibilities and again looking for an opt-out clause. One day it is Maastricht and the social chapter, the next day they opt out of their responsibility for our industrial base.
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Other Governments and countries recognise the problems. In opening the debate for the Opposition, my hon. Friend the Member for South Shields (Dr. Clark) spoke about the French, the Germans and the Americans. Those Governments are taking action and recognising the problem. Ours is the only Government who feel that they can abdicate all their responsibilities for those matters.We are not debating just defence expenditure but the need to protect Britain's industrial base. That is why Labour has demanded intervention and is arguing for a defence diversification agency. The Government must play a role in partnership with companies and employees so that Britain's industrial base can be rebuilt and maintained. No other country would abdicate its responsibility for companies of such importance.
When asked to choose between action to protect our industrial base or inaction, on every occasion the Government and the Minister of State for Defence Procurement choose inaction. That is why I ask my hon. Friends to vote for our motion, because only the Labour party has a strategy for the future and is concerned about our defence industry and our industrial strategy.
9.46 pm
The Minister for Industry (Mr. Tim Sainsbury) : I welcome this debate, and also welcome the hon. Member for Leeds, Central (Mr. Fatchett) back to it. I am sorry that he missed so many of the contributions.
The debate has brought out some of the positive aspects of changes in the defence market, as well as some of the inevitable disadvantages. Not for the first time, the incoherence of Labour policy on defence has been revealed.
We all know that the end of the cold war means that the United Kingdom's defence spending can decline by about 3 per cent. a year for the next three or four years. The effect of that on companies in the defence industry and on the areas in which they are located will vary. On the positive side, as my hon. Friend the Minister of State for Defence Procurement said, competitive procurement has helped our defence industrial base to become one of the most efficient and successful in the world. It would be nice to have that recognised more fully by the Opposition.
Mr. Ian Bruce : Is my right hon. Friend rather surprised that throughout the debate, the thrust of which has been about policy to help Tyneside, no one has mentioned the fact that the defence diversification agency, which was suggested by the Opposition, was rejected by the Select Committee on Employment which looked at that issue? The three measures that the Government have announced were those that the Select Committee report advocated in the context of the Government and enterprise agencies.
Mr. Sainsbury : My hon. Friend makes an effective point ; I shall speak later about the concept of a defence conversion agency. Our defence industrial base is, as my hon. Friend the Minister of State for Defence Procurement said, proving its competitiveness in the international markets. The success of our exports, which have increased two and a half times since the mid-1980s, is evidence of that, as is the fact that we are now the second-largest exporter, having overtaken France in the past few years. Defence is a net contributor to the balance of payments and sustains about
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120,000 jobs through exports. Last year, the total value of export contracts signed was about £5 billion, a record level for our defence industry.During the debate, a number of ideas have been put forward and a number of schemes have been mentioned, and I want to say something about some of them. My hon. Friend the Member for Chelmsford (Mr. Burns) drew attention to a scheme called KONVER, which is the latest in a series of Community structural fund initiatives, prepared by the EC Commission with the intention of addressing the problems of a specific industry.
The Government object strongly to such schemes in general, since they take such a partial approach to industrial adjustment. We object to KONVER in particular because of the mismatch between the areas where there are or may be job losses in the defence industry and the objective 2 and 5b areas which may be the only areas eligible for support.
Another serious deficiency in the scheme is the level of our allocation. It fails to reflect the importance of our defence manufacturing. We are making a forceful representation to the Commission about the way in which the funds are apparently being allocated. However, I agree with my hon. Friend that, if there is to be a scheme, it would be foolish not to take advantage of it. I hope that member states' KONVER programmes will be approved by September and we shall obviouly proceed if we get that approval.
Mr. Nicholas Brown : Will the Minister give way?
Mr. Sainsbury : No, there is no time to give way.
I come now to the important matter of Swan Hunter. The past achievements and the present plight of Swan Hunter were described most eloquently by my hon. Friend the Member for Tynemouth (Mr. Trotter). I shall say something first about claims which it has been suggested are a problem. It has been said that the Ministry of Defence owes Swan Hunter money. The Ministry of Defence has been scrupulous in making timely payments to the company, both on the AOR and on the type 23 frigate contracts, in full accordance with the terms of those contracts. The Ministry of Defence does not accept that it owes the company money.
Swan Hunter has made a claim for losses that it says it incurred on the replenishment vessel AOR2. That is a complex matter which the Ministry of Defence has been assessing as quickly as possible. It has been unable to accept some of the claim, but has made interim payments totalling no less than £8 million. I remind the House that the Ministry of Defence has obligations under the Insolvency Act 1986 and it could not responsibly have paid any more at this time. I confirm to my hon. Friend the Member for Tynemouth that the best and final offer date was, as he said, 22 April 1993.
Let me say something briefly in the time available about our response to what we are well aware to be serious consequences for Tyneside of the receivership of Swan Hunter. We recognise that this is a blow to those employed in the yard, their families, the local suppliers and the whole community, particularly in view of the yard's long and distinguished history as a warship builder.
My Department is keeping in close touch with the receiver to see that prospects for maintaining some engineering or
shipbuilding-related activities are fully explored. We shall also be doing all we can to see that new
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jobs are brought to the area. I announced last week a package of additional measures to help attract new investment and new jobs. In the time available, I shall not rehearse them this evening, but attracting new inward investment will be important. It is lucky that the region has a good record on that. Some good inward investment projects are in prospect, and my Department and the Northern Development Company are pursuing them energetically for the north-east.Opposition Members were dismissive of a package of measures such as that which I describe. Enterprise zones and other special regional initiatives have been most successful in helping to attract new investment in the wake of closures--[ Hon. Members :-- "In Sunderland?"] I will come to Sunderland in a moment, if members of the Opposition Front Bench will refrain from sedentary interventions.
Corby is an excellent example. There, 3,500 steel jobs were lost, but since then 13,000 jobs have been created. The Gateshead zone attracted substantial private sector investment and 2.75 million sq ft of new space-- mainly industrial--has been produced. At Consett, 3, 500 jobs were lost, but 4,000 replacement jobs were created. As to Sunderland, the Government's special package of measures announced in 1988 resulted in the creation of 3,750 jobs. It can be done--and, I am happy to say, all concerned will be pulling together to see that it is done. Local partnerships are vital. There is an excellent record of co-operation in the north-east on which to build.
We heard a lot about defence conversion. We should talk not about conversion but about diversification, because that is a more realistic and useful objective. We are talking about firms building on their enormous technological skills and know-how, to increase their penetration of civilian markets. Related diversification has succeeded in reducing many firms' dependency on defence, from something like 100 per cent. to nearer 70 per cent. My hon. Friend the Member for Chelmsford gave examples of achievements by Marconi--an important company in his constituency.
I remind the House of the measures that we take to help companies. We encourage innovation. We have the enterprise initiative and training and enterprise councils are giving particularly useful help to firms with counselling, information and advice, training and business skills. More specifically, my Department supports company efforts to diversify through the series of "Changing Tack" regional seminars held over the past year to highlight diversification possibilities.
My hon. Friend the Minister of State for Defence Procurement asked pertinent questions about the Opposition's proposal for a defence conversion agency. What would it do? What is it meant to do? How would it undertake its task? If subsidies were to be involved, how compatible would they be with the level playing field that the Opposition always seek? From where would the money come? I share the scepticism expressed by my hon. Friend the Member for Ruislip-Norwood (Mr. Wilkinson).
At the end of this debate, we are no wiser as to what that agency would do. I am reminded of King Lear's words :
"I will do such things--
What they are yet, I know not."
We are in the same position in respect of the defence conversion agency.
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The debate exposed the absurdity of Labour's proposal for such an agency--son of the National Enterprise Board, if ever there was one. It reveals once again the depth of Labour's lack of understanding of how to help British industry become more competitive and better able to create sustained employment. It has exposed something more-- the hypocrisy of a party that consistently voted for massive reductions in defence spending, but then cynically complains about potential job losses in the very defence industries that Labour's policies would decimate.That is a typical example of political expediency from a party that does not have the courage to face the facts and tell its supporters the truth. The motion was put before the House tonight for one purpose only--to get the Labour party off the hook.
Nor do we need reminders about the shamefaced shambles that characterises Liberal Democrat policy. Or should I say policies, because that party has as many policies as it has members--and a different lot for tomorrow. It puts me in mind of Kipling's couplet :
"There are nine and sixty ways
Of constructing tribal lays,
And every single one of them is right."
The trouble with Liberal policies is that most of them are left and all of them are wrong.
I commend the amendment to the motion to the House. The Labour party has had 14 years of irresponsibility over defence policy. It has not learnt. It still sees phantom orders for phantom ships pursuing phantom enemies.
Question put, That the original words stand part of the Question :--
The House divided : Ayes 263, Noes 304.
Division No. 276] [10 pm
AYES
Abbott, Ms Diane
Adams, Mrs Irene
Ainger, Nick
Ainsworth, Robert (Cov'try NE)
Allen, Graham
Alton, David
Anderson, Ms Janet (Ros'dale)
Ashdown, Rt Hon Paddy
Ashton, Joe
Austin-Walker, John
Banks, Tony (Newham NW)
Barnes, Harry
Barron, Kevin
Battle, John
Bayley, Hugh
Beckett, Rt Hon Margaret
Beith, Rt Hon A. J.
Benn, Rt Hon Tony
Bennett, Andrew F.
Benton, Joe
Bermingham, Gerald
Berry, Dr. Roger
Betts, Clive
Blunkett, David
Boateng, Paul
Boyce, Jimmy
Boyes, Roland
Bradley, Keith
Bray, Dr Jeremy
Brown, Gordon (Dunfermline E)
Brown, N. (N'c'tle upon Tyne E)
Bruce, Malcolm (Gordon)
Burden, Richard
Byers, Stephen
Callaghan, Jim
Campbell, Mrs Anne (C'bridge)
Campbell, Menzies (Fife NE)
Campbell, Ronnie (Blyth V)
Campbell-Savours, D. N.
Canavan, Dennis
Carlile, Alexander (Montgomry)
Chisholm, Malcolm
Clapham, Michael
Clark, Dr David (South Shields)
Clarke, Eric (Midlothian)
Clarke, Tom (Monklands W)
Clelland, David
Clwyd, Mrs Ann
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cook, Frank (Stockton N)
Cook, Robin (Livingston)
Corbett, Robin
Corbyn, Jeremy
Corston, Ms Jean
Cousins, Jim
Cryer, Bob
Cummings, John
Cunliffe, Lawrence
Cunningham, Jim (Covy SE)
Cunningham, Rt Hon Dr John
Dafis, Cynog
Darling, Alistair
Davidson, Ian
Davies, Bryan (Oldham C'tral)
Davies, Rt Hon Denzil (Llanelli)
Davies, Ron (Caerphilly)
Davis, Terry (B'ham, H'dge H'l)
Denham, John
Dewar, Donald
Dixon, Don
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