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Mr. Iain Duncan Smith (Chingford and Woodford Green): I am grateful to the right hon. Gentleman. I understand that he has much to say and wants to get on, but I cannot let his remarks about the previous Government pass. The previous Government advertised and took advice from industry, which was part of the process. All the advice that they received was negative, so a rethink began. There was no commitment by the previous Government to go down the road on which the present Government have embarked.
The right hon. Gentleman said earlier that roll on/roll off vessels were not warlike, as they did not enter the war zone. That is not the sole criterion, as he knows. The question is the extent to which the Ministry of Defence can call on such vessels. The right hon. Gentleman's own tender document specifies one ship at five days' readiness--
Mr. Hoon: Let me deal with the advertisement in the Official Journal. If the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) is saying that the problems experienced by the previous Government were caused by the advertisement that they placed, I can well understand why industry was anxious about their policies. Placing an advertisement in the Official Journal is a clear indication that the Government intend to go ahead with the contract in question. If the hon. Gentleman is saying that the previous Government placed advertisements to invite industry to participate in a competition, but that they did not really mean it, that says much about their attitude towards industry.
We were anxious to encourage competitive UK bids for the ships, and asked all consortiums to explore fully the opportunities for UK build. Indeed, bidders offering overseas build have had to show that UK yards would not have been competitive for those particular ships.
I emphasise that, under EU rules, the Government are not allowed to direct that such ships are built in the UK. The only legal ground on which we are able to award the contract is value for money, defined by reference to price, quality and delivery.
Nevertheless, I am pleased to announce that two of the ships will be built in the UK. Subject to final negotiations, we intend to sign a 25-year contract with the Andrew Weir Shipping Ltd. group based in the UK. This is not a shipbuilding contract, but a contract for the provision of a complete service, including crewing, maintenance, and management of the ships. Andrew Weir has stated that it will provide British crews when the ships are in Ministry of Defence use. The winning bid involves the construction of two ships by Harland and Wolff in Belfast, with the other four to be built in the Flensburger yard in Germany.
Mr. Hoon: The contract is worth about £950 million in total. Of that, 85 per cent.--more than £800 million--will be spent in the United Kingdom, in Britain's interests, in the interests of the armed forces, and, I am pleased to say, in helping to sustain UK jobs at Harland and Wolff.
Mr. Hoon: Moreover, building two of the ships at Harland and Wolff ensures that our armed forces will have the full sealift capability by 2003--the earliest delivery offered by any of the bids--and this option, with ships built against a proven design, was cheaper than any of those offered by any other consortium.
It is expected that the order will secure between 400 and 600 jobs in Northern Ireland, and give opportunities for UK suppliers throughout the 25-year period of the contract. Harland and Wolff can also expect to benefit from the partnership with Flensburger. That will further enhance the Northern Ireland yard's prospects of further orders from the international commercial market.
Mr. Hoon: Let me complete the statement, and I shall certainly give way in due course. I know that some right hon. and hon. Members will be disappointed that shipyards of particular concern to them have not been selected, but I want to proceed to the second announcement, so that the House has a complete picture of what is intended.
The strategic defence review recognised the need to improve our amphibious shipping. We have organised a competition to build two new amphibious landing ships--or, to use the jargon, alternative landing ships logistic. Unlike the roll on/roll off ferries, these are warships and therefore will be built in British yards.
Such capable and flexible vessels are designed to deploy amphibious forces directly into a hostile environment. They provide a capability to be used in conjunction with the new landing platform dock ships, HMS Albion and HMS Bulwark, to deploy the lead elements in an amphibious force. Landing ships like these can also support small and non-warfighting operations, as did two in the taskforce for operation Palliser to Sierra Leone. Currently, this capability is provided by five ageing landing ships. The bulk of these vessels are now more than 30 years old. The vessels are increasingly expensive to maintain, and are severely limited in their operational utility.
I hope that the House will be pleased to learn that I can announce today that we intend to buy four ALSLs, not two. Subject to negotiation of satisfactory terms and conditions, Swan Hunter (Tyneside) Ltd. has been selected as lead shipyard for the programme. Two ALSLs will be built on the Tyne by Swan Hunter, creating 1,000 new jobs in its Tyneside shipyard. This will bring the work force up to 1,800 at their peak, while sustaining about 200 jobs off site. The other two ALSLs will be built to the same design as the two which we intend to negotiate with Swan Hunter. Given that we need these ships as quickly as possible, capacity constraints at Swan Hunter mean that we have decided that they need to be built elsewhere.
Subject to satisfactory contract negotiations, which will be informed by Swan Hunter's price for the first two vessels, these two further ships will therefore be constructed at BAE Systems' Govan yard on the Clyde. Swan Hunter will be contracted by the Ministry of Defence to provide the necessary lead shipyard design services.
The overall value of the contracts which we hope to place for these new 16,000 tonne ships will be about £300 million. Steelwork could begin by the middle of next year. It is worth noting that the contract value of each ALSL is broadly equivalent to building two ro-ro ferries. It is expected that the order will secure about 800 jobs at the Govan yard, together with about 200 jobs off site.
I am offering a real lifeline to the BAE yard at Govan, one that will help to sustain the shipbuilding skills base on the Clyde until the type 45 programme comes on stream. I am confident that the management and the unions there will react enthusiastically.
Mr. Tony Worthington (Clydebank and Milngavie): It is regrettable that a statement was not made earlier so that we might fully examine these matters. When will steelwork begin in the Govan yard? It is crucial that the yard be filled now.
Mr. Hoon: I indicated that we would hope that steelwork could begin by the middle of next year. The precise timing is a matter of negotiation between Swan Hunter and BAE Systems. I understand that there is no good reason why that should not occur towards July.
Mr. Ian Davidson (Glasgow, Pollok): I appreciate the work that is coming to Clydeside. It will be welcomed by the work force, whose members have been on tenterhooks for about 18 months. However, there is a difficulty in the immediate short term about the steelwork. Is my right hon. Friend able to clarify when an order for a floating dock might be awarded? Is it possible to have that order immediately to fill the short-term gap? Many in the shipbuilding industry deprecate the fact that the orders for the ro-ros are going to Germany. An order should have been placed within the United Kingdom to maintain maximum employment and to ensure competitive abilities for the future.
Mr. Hoon: As for the ro-ro ferries and UK build, I set out in considerable detail the legal difficulties that any Government would have faced in trying to place an order for a commercial ship in a UK yard. It would not have been possible. We have discussed these matters at great length over a long period. The legal advice was absolutely clear. The reality is that we could not direct these ships to be built in the UK, because of European Union rules. In the circumstances, we have considered the capacity that is available in UK yards. We have also had regard to the comprehensive programme of shipbuilding. If my hon. Friend examines my statement at greater length, I think he will find that we have been able to provide work at a number of shipyards, and particularly Govan.
As for the gap between the present availability of orders and the prospect of orders in future, I understand that the work that we hope will go to Govan will be sufficient to allow Govan to continue and to provide work for its employees.