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Mr. Mark Todd (South Derbyshire): Has my hon. Friend looked at how rail operators on the continent choose to manage their procurements? He may have
seen examples of much tighter regulation that ensures that much of the work in replacement vehicles goes to local manufacturers.
Mr. Laxton: I thank my hon. Friend. I shall come to that issue, which has been a particular interest of mine, later in my speech. For sure, some of the comments are anecdotal, but they give a good flavour of the differences between our procurement procedures and those of some other European countries.
It is fair to say that we play by the rules that the European Union has set, but do all countries do the same? Let me give an example. The Derby Evening Telegraph sent one of its reporters out to Crespin in France, where Bombardier has a site. A Monsieur Louadoudi, who worked on the site, expressed horror that the UK Government could let trains that were to be used in England be built in another country and expressed fears that something similar to what happened to Bombardier could happen in Crespin. That seems unlikely, however, because France, Germany, Italy and Austria all stipulate that at least 60 per cent. of their trains must be made within their national borders. That explains why Bombardier has sites not only in France, but in Germany, Austria, Switzerland and Sweden. None of the Governments of those countries would consider buying their trains from a company that intended to use foreign suppliers.
My local newspaper, the Derby Evening Telegraph, quoted me as saying that the UK plays cricket while our competitors play karate. Admittedly, that was an unfortunate slur on a Japanese art form that has rules as stringent, if not as strange, as those of cricket. What I am saying, though, is that other European Governments do not hesitate to muscle in if they see the need to protect their core infrastructure and industries. I am not advocating that the Government subsidise Bombardier—Bombardier has made it clear that it does not expect a subsidy—and I am certainly not advocating that the Government do as the French have, and buy a share in a company such as Alstom simply to sustain financially its manufacturing in France. I am advocating that the Government take a more active approach in ensuring that the UK maintains an industrial base.
Train operating companies in the UK do not have to think twice if the train that they have commissioned to be used by a UK passenger is manufactured in Derby or in, say, Bruges. Someone who works in the railway industry told me that when train companies made bids in countries such as France and Germany, the Governments of those countries repeatedly stressed to them that they should use local suppliers. I hope that the Government will seriously consider doing the same.
Train manufacturing is not simply a part of Derby's past—it is part of the UK's future. There is little point in investing additional money into raising the standards of vocational engineering courses and encouraging more students to take up this shortage occupation at degree level if we insist on exporting their jobs to other European countries.
It is well recognised that labour laws in the UK are more flexible than those of our continental European cousins. If the Government do not seek to tie the hands of international companies with inflexible labour laws, we should, for the sake of future generations, tie their
hands in a different way. An international company that is granted a franchise should be made to carry out at least 50 per cent. or, better, 60 per cent. of its production within the UK. In its time, FGK has given two contracts to UK-based firms and two to overseas firms. As a Bombardier spokesperson said,
- "It is now obvious that firms do not have to be based in the UK to win UK orders".
Bombardier could look to its European network to transfer any excess work from a European site to Derby. That was done in the past at its Wakefield site, which had such a tight deadline for meeting an order from Virgin Cross Country that work was moved to Bombardier in Belgium and France. Colin Walton, Bombardier's vice-president of sales, mentioned that possibility. However, in view of a more recent briefing by the company, I understand that it is a remote possibility as there are other Bombardier sites in Europe with gaps in their order books.
Mr. Patrick McLoughlin (West Derbyshire): I congratulate the hon. Gentleman on raising this issue which, as he rightly said, is causing great concern in his constituency and throughout the southern part of the county. Does he agree that as the days go by, uncertainty about when decisions will be taken is causing increasing concern? Members on both sides would like to ask the Minister to say to the company that it should let people know what is going on. The hon. Gentleman made several points that would answer some of the problems that are perceived as a serious threat. I agree with him that we must put pressure on the company to come to a conclusion and show those who have worked loyally for it that there is a bright future.
Mr. Laxton: I thank the hon. Member for West Derbyshire (Mr. McLoughlin). I understand that it is soon to become Derbyshire Dales, and not before time. I agree with him entirely. The situation is not being helped by the fact that the chief operating officer of Bombardier is constantly being quoted about overcapacity in Europe and is actively looking at the closure of sites in Germany and the United Kingdom. All that adds to uncertainty about what will happen, whether the gap will be plugged and whether the work force will have jobs. To be absolutely fair to the work force, from talking to trade unions it seems that they perhaps take the view, "We have been here before and survived." They seem reasonably buoyant, but as time goes by they are bound to get stressed out from all the doubt and indecision.
Can the Minister give us an indication of what help the Government can give Bombardier? Will they help it look for work from Scotland, Ireland and other parts of the world? Bombardier is a world-class company with a world-class work force in Derby. I hope that the Government recognise that and will offer some help, perhaps in the form of export guarantees to assist Bombardier win work from abroad or bringing forward orders to replace the high-speed 125 train.
As the hon. Gentleman said, uncertainty is the real difficulty. It is problematic for the work force. Close to 14,000 jobs are at stake. After 163 years of train manufacturing in Derby, is it going to disappear and will there no longer be a train manufacturing or assembly site anywhere in the United Kingdom? Will all future orders for British Rail and the underground network have to be sourced and built outside the United Kingdom? Surely not.
4.48 pm
The Minister for Industry and the Regions (Jacqui Smith): I congratulate my hon. Friend the Member for Derby, North (Mr. Laxton) on securing this debate, doing a good job representing Bombardier and its work force in this House and working hard to convince us that Derby is the centre of the world. As I am outnumbered in the Chamber, I will concentrate on Bombardier as opposed to the first part of his speech.
I am aware of reports in the media suggesting that Bombardier is looking at closures in Germany and the United Kingdom. I can assure the House that my officials are in regular contact with Bombardier's senior management team in the United Kingdom. Recently, I met my hon. Friend the Minister of State, Department for Transport, who has visited Bombardier. I have not yet had the opportunity to visit it, but I have been fortunate to visit manufacturing companies in Derby, which I consider to be important. In discussions with my hon. Friend, I was able to discuss the situation at Bombardier and wider issues concerning rolling stock procurement—issues that we both take extremely seriously.
The most recent announcement from Bombardier was made on 7 October, and while I fully understand local concerns about the future of the Derby plant—the hon. Member for West Derbyshire (Mr. McLoughlin) made a very fair point in that regard—it might be useful to recap on what the company has actually said, against a background of the general over-capacity in the rolling stock sector in Europe. Paul Tellier, Bombardier's Canadian chief executive, said that the company needed to cut its overheads in Europe to remain competitive. It has started an audit of its sites, and consolidation to remove excess capacity is expected quite soon, possibly starting in the new year. He has mentioned plants in Germany and the UK. However, until that review is completed, there will be no further comment from the company.
I fully appreciate that, as my hon. Friend the Member for Derby, North has said, this will be a cause for some anxiety in Derby, but there has been no suggestion at this stage that the Derby plant will be closed. It would therefore be premature to talk about major job losses in the rail supply chain. I strongly agree with my hon. Friend, however, that the UK needs high-tech, high-
value, high-skill manufacturers such as Bombardier. I very much hope that Bombardier and companies like it will form the backbone of the future of manufacturing industry in this country, not least for some of the reasons outlined by my hon. Friend the Member for Crawley (Laura Moffatt).My hon. Friend the Member for Derby, North pushes us on the position with regard to train manufacture, and I hope that I can reassure him that the Government want train manufacturing in the UK to have a strong future. I would certainly not wish to see the end of train-making in this country, and, as my hon. Friend has ably pointed out, continued production at the Derby site is hugely important to the locality, the industry and the supply chain. Furthermore, the company is a major inward investor in the UK, with more than 5,000 people employed in its rail business. When it acquired the Adtranz train building operation in 2001, it quickly resolved inherited problems and made an excellent job of turning round the company. It is making a significant contribution to improved efficiency and standards in the UK rail network.
My hon. Friend raised the issue of the TransPennine express order, and I understand that it will have come as a disappointment to Bombardier, and to the work force and unions, that it did not win the order for those trains. There is strong competition for all rolling stock orders, particularly in the light of the over-capacity in Europe at the moment. Procurement decisions are for the train operators, not for Ministers, but I know that the loss of that order has understandably led to a great deal of concern in the Derby area. That is why, at the request of my hon. Friend the Member for Derby, North, my hon. Friend the Minister of State, Department for Transport has reviewed the award of that contract. He was satisfied that fair and open competition had been conducted, and that the decision on manufacture would deliver the desired value for money required by the Strategic Rail Authority. In spite of the setback, Bombardier has an excellent track record and a highly skilled work force, and I look forward to it winning further orders.
The Derby plant is currently embarking on an 18-month period of unprecedented production volumes. It is taking on staff to cope with the increased output needed to deliver a large order of new Electrostar trains next year to replace slam-door trains in London and the south-east. I know that Bombardier has also won contracts for Nottingham trams and large orders for London Underground, to be delivered from 2008 onwards. This is a tribute to Bombardier's management and its work force. As my hon. Friend has pointed out, however, the Derby site has a gap in its order book between 2005 and 2007, and we need to put that into context.
The company is currently doing well. Nevertheless, I fully understand local concerns. I am aware of Bombardier's importance to the Derby area. It is a major employer providing valuable skilled jobs, including, as my hon. Friend said, jobs in the rail supply chain. I also know that Bombardier's management is actively trying to plug the gap, and is investigating the scope for rescheduling existing orders. The company is a major player, highly successful and well managed, and more than capable of winning further contracts.
My hon. Friend mentioned support for exports, and I shall say something about that shortly. He also raised the issue of rescheduling. Although, as he said, considerable difficulties are involved, I am sure that sensible proposals from the company would be considered, although I make no commitments.
It has been suggested, although not, I think, by my hon. Friend today, that the problems of Bombardier and all UK train manufacturers are caused by our failure to invest in the industry. That is not true: rail investment is running at unprecedented levels. Between 2000 and 2010, there will be £33 billion of direct investment. By 2005, the Government will be spending twice as much on rail as we did in 2001. This year we are spending £73 million a week on improving the railways, and bringing in a similar amount from the private sector.
Rolling stock is getting its fair share of that money. We are in the middle of the biggest rolling-stock replacement programme ever seen in this country: some 40 per cent. is being replaced between 2000 and 2005. Since 1997 there have been 41 rolling-stock orders, representing nearly 4,500 vehicles. It is certainly not true that all the business has been going abroad, although I will deal later with some of my hon. Friend's worries in that regard. No fewer than 35 of those 41 orders have been won by UK-based companies, which means that three quarters of all vehicles ordered since 1997 have been built here. Bombardier has been much the most successful single firm, having won 28 orders and built nearly 2,500 vehicles—more than twice as many as its nearest rivals.
My hon. Friend is worried about the scope for ensuring that UK investment benefits UK industry, but the answer cannot be insisting that rolling stock for use in the UK must be built here. Naturally people ask why we should insist that contracts go to UK manufacturers if taxpayers' money is used to buy the trains, whether directly or through the subsidies paid to train operators. The Government have a role in ensuring that there is a full and fair procurement process, but they cannot dictate where orders are placed or where vehicles are manufactured. The placing of orders is a matter for the train operators, and in many cases European Union procurement rules mean that orders cannot simply be directed to UK builders. Of course we want to see UK companies winning UK orders, but we also have a responsibility to taxpayers and fare-paying passengers to ensure that we get the best possible value for money when investing in new rolling stock.
Competitive bids are the best way of guaranteeing that. Artificially restricting the number of firms allowed to bid is a sure way of driving costs up and getting poor value for money. It has been suggested, however, that even if we insist on awarding our own contracts fairly, the procedure may not always be followed so scrupulously elsewhere. That point was made by my hon. Friend the Member for South Derbyshire (Mr. Todd), and the trade unions have raised it as well. We are taking it very seriously. The Department for Transport and the Department of Trade and Industry are to look into the award of rolling-stock contracts in other EU states over the past seven years to establish whether a clear pattern can be identified. It is crucial that there be a level playing field across Europe.
As I have already pointed out, most trains bought by British train operating companies in recent years have been built in Britain, but this is an area that warrants further investigation. The Chancellor announced in his recent speech at Bournemouth that the Government would review UK businesses' experiences, good and bad, of competing for public procurement contracts in other EU countries—
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