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Written Ministerial Statements

Tuesday 8 February 2005


Greater London Authority (General Grant)

The Minister for Housing and Planning (Keith Hill): Further to my previous statement on 2 December 2004, Official Report, column 50WS, I announce today that the Greater London authority general grant for 2005–06 has been determined at £37,493,000, after consultation with the Mayor of London.

GLA general grant is a block grant paid for the purposes of the authority and its functional bodies.

I would also like to draw the House's attention to a printing error that occurred in the Official Report in my previous statement. The correct figures for the GLA general grant for the following periods are as follows: £37,493,000—2005–06, £37,868,000—2006–07, and £38,243,000—2007–08. I am sorry for any confusion caused.

Firefighter Pensions

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope): The Office of the Deputy Prime Minister has today published a consultation document setting out proposals for new financial arrangements for firefighter pensions.

The firefighters pension scheme is currently financed on a "pay-as-you-go" system. This means that employees' contributions are paid into fire and rescue authorities' operating accounts from which pensions awards are made. Authorities receive funding from central Government to support pension payments as part of formula grant.

The current system for financing firefighter pensions can cause volatility in pension expenditure as a result of lump-sum retirement payments. It can also be difficult to establish what proportion of budget and council tax increases is the result of rising pension costs as opposed to the cost of running the service. Further, over time the forecast growth in pension costs would see pension expenditure rise as a proportion of authorities' budgets.

The new financial arrangements we are proposing are based on employer contributions and are similar to those used for other unfunded public service pension schemes such as those for teachers, civil servants, NHS staff and the armed forces.

The new arrangements would mean that employee contributions and a new employer's contribution would be paid into a new local pension account, from which pensions payments would be made. Government would make up the shortfall as necessary. At the outset, appropriate adjustments would be made in the level of grant so that neither local nor national taxpayers would be disadvantaged.
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The new arrangements would be for both the existing and new firefighter pension schemes, but would have no impact on the terms and conditions of either scheme.

Consulting on these proposals is part of the Government's commitment to review the financial arrangements for firefighter pensions which was made in the 2003 White Paper "Our Fire and Rescue Service" and reiterated in 2004–05 and 2005–06 "Fire and Rescue National Frameworks".

Copies of the consultation document have been sent to fire and rescue service stakeholders, including chief fire officers, chairs of fire and rescue authorities, the LGA and the Fire Pensions Committee. The consultation period will be for twelve weeks and will close on 3 May 2005.

Copies of the 2005–06 "National Framework" are available in the Libraries of both Houses.


Future Aircraft Carrier

The Secretary of State for Defence (Mr. Geoffrey Hoon): I announced yesterday the selection of Kellogg Brown and Root (UK) Ltd. (KBR) as the preferred physical integrator for the future aircraft carrier (CVF) project. I am now able to provide further details.

The CVF alliance is based on best practice for the delivery of complex and major programmes in the commercial sector, including construction, oil and gas. Construction of the two biggest warships ever built in the UK is a massively complex project and a formidable challenge for British industry in both technical and managerial terms. Previous investigations have shown that no single company or shipbuilding facility in the UK has the skills or capacity to build the two ships on its own. The carriers will therefore need to be constructed at a number of different sites before transportation to a final integration facility; building and integrating them represents a major challenge which requires special project management skills. In discussion with our current alliance participants, BAE Systems and Thales UK, it was agreed that there was a need to appoint a company—as a risk-bearing member of the alliance—to strengthen our approach and introduce innovation to the manufacturing phase. This role has been termed the physical integrator (PI).

We will develop the precise role and responsibility of the PI in consultation with all alliance participants over the coming months—an approach that is consistent with alliancing best practice where each participant's work scope is agreed by the alliance to ensure that work is allocated to the company best able to deliver it in the most cost-effective manner. In broad terms, however, we anticipate that the preferred PI will be involved in developing the build strategy for the carriers.

We put in place a robust competitive exercise to select the preferred PI. A shortlist was produced of candidate companies likely to have the necessary skills and experience to undertake the PI role—Alstom Marine, AMEC, BAE Systems Naval Ships, Bechtel (UK), Kellogg Brown and Root Ltd. and Vosper Thornycroft. The requests for proposals issued to the companies in September 2004 set out our general requirements, the submission process and the evaluation criteria. A robust
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process was used to evaluate the proposals submitted. Each company was required to demonstrate its competence in a wide variety of areas including: successful delivery of projects that had demanding time, cost and performance targets; an ability to innovate to ensure that all opportunities for greater value for money could be addressed; and to demonstrate a breadth and depth of capability and capacity to manage complex programmes.

The result of the evaluation determined that Kellogg Brown and Root Ltd. was the strongest candidate. Kellogg Brown and Root is an established UK-based company which has demonstrated a proven track record of delivering bespoke, geographically spread and logistically complex construction projects; it also has experience of delivering UK MOD projects such as CONLOG, the heavy equipment transporters and temporarily deployable accommodation that were successfully used during Operation Telic. Kellogg Brown and Root Ltd. will also bring extensive experience of alliances from other sectors including oil and gas and infrastructure.

CVF represents a vast programme of work and overall should create or sustain up to 10,000 jobs in the UK. Kellogg Brown and Root Ltd. is likely to build up to a 50–60 strong team during the assessment phase, largely comprising existing members of that company who have off-shore experience. No final decision has been taken on build strategy but we still anticipate that, subject to value for money, the carriers will potentially be built by a combination of the four shipyards named in January 2003—BAE Systems naval ships at Govan, VT at Portsmouth, Swan Hunter on Tyneside and Babcock BBS at Rosyth. We would stress that decisions relating to the build strategy will be taken by the PI and the alliance as a whole—including BAE and Thales UK—with the customer i.e. the Ministry of Defence retaining a final veto.

Bringing the preferred PI into the CVF alliance before the main investment decision is a sensible de-risking measure that will facilitate the formulation of the optimum approach to the ship build of the carriers. Kellogg Brown and Root Ltd. will liaise with other alliance participants and work with all potential shipyards and other manufacturing facilities to propose a cost-effective approach to the manufacture of the vessels. This strategy will need to be agreed by all alliance participants including, ultimately, the Ministry of Defence. The MOD, as client, will retain the right to have the final say on all work allocation and selection decisions. Like all other alliance participants, Kellogg Brown and Root Ltd. will need to demonstrate satisfactory performance and appropriate alliancing behaviour throughout its appointment. We will now discuss the scope and value with the company before awarding an initial contract to KBR for assessment
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phase work, which is expected to be of a value of around £5 million. This represents a firm commitment to the alliance approach for delivering the carriers and is an important step forward both for the programme and the CVF alliance.

We will continue to engage with our industrial participants over the coming months as we meld the PI role into the alliance, and the detailed role and responsibilities of all parties are agreed. We are confident that this is the correct decision and remain committed to the alliance approach, which represents the best route for providing our armed forces with the equipment promised to them by our target in-service dates of 2012 and 2015. We also remain fully committed to an approach which delivers maximum benefits for UK industry.

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