Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 120-139)


21 NOVEMBER 2006

  Q120 Linda Gilroy: A question specifically to Mr Hazlewood—because I can get my head around how design teams and design drafts people take quite a long time and you need to keep them together—can you just explain in a bit more detail as far as electricians, fabricators and trades people are concerned, those that work on the submarine, and we have talked about the high level of skills, in terms of the time taken to acquire those skills and experience, how would that compare with probably pretty skilled people who work on ships and so on? What is the extra? Is it years?

  Mr Hazlewood: To be proficient in the submarine industry you are looking in terms of years at nine years whereas within a normal shipbuilding yard you are looking at three, four, five years, a normal apprenticeship.

  Q121 Linda Gilroy: So if a gap develops that is—

  Mr Hazlewood: That is right, yes.

  Q122 Willie Rennie: I am a bit confused by some of the comments. You say retention is good at Barrow but then you say there are adverts from Australia seeking staff there. Then you say if Barrow were to go you would not get the skills back, but obviously it is a good enough place to work so why would they not come back? I was a bit confused about all that kind of thing.

  Mr Waiting: I think there have been surveys done and I think the most recent perhaps was for the Rover plant when people left that industry, and 70% of them would not return to it. That was a similar experience as we had in Barrow-in-Furness with the redundancies in the 1990s. Once we had lost the workforce they would not come back into the yard, voluntarily or otherwise. If they could find any sort of job they went into different jobs and they would not come back again. A lot of the younger people left the area for good and did not return, so we lost those skills. Quite a number of other people went on long-term incapacity benefit. I think if you look at the North West Development Agency's documents they say Barrow is perhaps one of the largest pockets of worklessness in the North West because the men and women did have industrial injuries and once they were out of work they capitalised on them, for want of a better word, but that is what happens, that is really what happens in a working town. It happened in the coal-mining communities as well. The whole community goes down. It is not easy to get back into work and it is easy to get back into ordinary jobs. It is the same when you live in places that are remote like a coal-mining area or like Barrow-in-Furness, it is not easy to get into other work. If you lose the skills of drafts people and the designers, they go away and they do not return because they have got well paid jobs out of the place. The people who are coming from Australia and other places and advertising in the local paper in Barrow want people who are already in work. They are not looking at the ones who are unemployed really. They want the people who are in work.

  Q123 Willie Rennie: But you did reconstitute them for Astute. How did you manage to do that?

  Mr Waiting: First of all, we sought assistance from Electric Boat. One of the things the managing director did was to seek the assistance of Electric Boat, the American company, and they did assist us greatly. I have got to say it was a two-way street because we helped them in some techniques on welding as well, so it was not a one-way street. That was one of the things that we had to do. Then we trained our own people to the standard required. We have going through the Barrow yard now a number of graduates and we have a very successful graduate training programme. We make sure that we do; it is an active thing, it is not an accident. We go to the universities and attract people to our industry. Through the graduate training programme in Barrow-in-Furness we are getting the right sort of people and training them through. If there is a gap now in the submarine build or a gap now where we do not order the future Tridents, there will be an excess of design engineers and everything else in Barrow, as I think was said at the meeting on 7 November, in the middle of next year. Those people will go and they will not come back to Barrow, they will go somewhere else.

  Q124 Willie Rennie: You did reconstitute it for Astute so why can it not be done again?

  Mr Hamilton: That is where the strategic capability and the Defence Industrial Strategy has to make the change. You have seen the evidence from Murray Easton. A lot of the cost overruns were because of that. The delay in terms of getting Astute out was because of the learning curve that had to be relearned. Murray Easton in his evidence gave you the fit-for-purpose workforce and it is the same across the whole spectrum, whether it is design, build or maintenance of that capability and that workforce. As other colleagues have said, people who work in the shipbuilding industry and refit ships, on the face of it the skills set may look the same but it is completely different when it is applied to submarines because the standards that are required to work on board nuclear submarines and the capability of the nuclear submarines requires that learning curve to be relearned and yes, it was reconstituted fortunately in the Barrow area to build the Astute, but if another delay were to take place as was done between Vanguard and Astute then that capability will be lost in the UK forever. You need only look in your own backyard, Willie, in terms of the effect that that has. Yes, thousands of skilled people left Rosyth Naval Base but when Babcock went back at certain peaks and troughs within the refit cycle to bring skills back in again, they were not there and, equally, they were not fit for purpose because they had left that continuity of training and education which is done on the job, and therefore there is a cost and there will be a very high cost to the public purse if that delay takes place.

  Mr Hazlewood: If I could just come back to what we mentioned earlier, you mentioned retention and peaks and troughs within the industry, and hopefully this will be addressed by the Government's White Paper, but while you have got peaks and troughs you are going to lose people and in a lot of cases you are not going to get these people back, the reason being they are going to find continuity of work elsewhere and you will never get them back. That is the biggest fear that we have within the industry. That is why we need this continuity across the piece.

  Mr Holloway: I do think that people sometimes think in these procurement programmes there is a confusion and a gigantic grey area between jobs and having the right equipment—helicopters and fast jets come to mind here—but leaving aside the important issue of keeping jobs and communities like Barrow alive, do you guys not think that there is a global market for skills as well as equipment and therefore that the situation might not be as critical as you paint it?

  Q125 Chairman: Who would like to start on that? Mr Waiting?

  Mr Waiting: In what respect? If you want to build atomic submarines and if there is a requirement for atomic submarines and for a nuclear defence of the realm, then you want atomic submarines and the capability is in Barrow-in-Furness. If you are talking about aeroplanes you can build aeroplanes almost anywhere—America, France, wherever. You do not need any extra special facility. If you are going to build an atomic submarine you need an extra special facility. If you are going to maintain an atomic submarine you are going to need an extra special facility. DML is one of those facilities. Faslane is another one of those facilities. You could not say, for instance, we will do it in Liverpool because they have not got the expertise and the licences and everything else, and all of the work that went on for many years before that; you cannot do that. It is not something where you can just say, "We will not do it this week, we will do it over here, we will do it there"; you cannot do it. It is not exactly the same as fast jets and helicopters. As I have said, the capability for the defence of the realm, if it is going to be submarine-based Trident missiles, has got to be done in places like Barrow-in-Furness and serviced in places like DML and Faslane.

  Q126 Mr Jones: If a decision were taken to abandon Trident, which is obviously an option which certain people are arguing for, that is clearly going to have a massive impact on places like Barrow. What would it mean in terms of jobs? You have already touched on skills but also the argument—and this is not one I am putting forward I hasten to add—that it would be easy to find alternative employment there. Can you just talk us through first what the effect of it would be and then what the alternatives would be?

  Mr Waiting: If we are not going to continue with the Trident replacement, then the future for Barrow is non-existent really. In 1991-92 when we lost the major part of our workforce (9,500 jobs) overnight we set up an organisation called Furness Enterprise and its remit was to build a local economy so we would no longer be dependent on a single employer so that we could diversify our economy. In that regard Furness Enterprise has failed. In lots and lots of other ways it has been tremendously successful but Barrow-in-Furness is still dependent on BAE Systems and our shipyard for the major part of its employment. Barrow-in-Furness takes £73 million in wages from BAE Systems every year. That cannot be replaced. There is nobody going to relocate to Barrow-in-Furness to give us jobs, believe me.

  Q127 Mr Jones: I am a very sad individual and on Saturday night I was reading the RAND report on the future of shipbuilding. I am very sad! One of the recommendations in the RAND report is that shipbuilding should be considered for Barrow, particularly in the next few years when you have got this bow wave of procurement, MARS and the carriers and everything else. What is your response to that? Playing devil's advocate, we could say there is enough procurement coming from surface ships to put capacity into Barrow.

  Mr Waiting: In fact, it could create more problems than it will ever solve. For the carrier for instance we are down, I understand, if it ever is built, to build one block of that. The MARS programme I guess is what the RAND report is talking about—I know it is—but that is some years away yet. What are we going to do? There is going to be a big trough in the meantime because you are not going to build a future Trident so what happens then, how do we maintain that workforce, because it is unsustainable? I know that BAE Systems are not going to have 3,500 people walking round with their hands in their pockets, they are not going to do it. I understand their profit was two per cent but they are allowed up to six or eight per cent to take the profit from any MoD order. If you were a shareholder right now with the way that the interest rates are going, if that is all of the return you could get for your money I think you might be interested in putting your money into a building society rather than in BAE Systems. I do not say that lightly because that was put to me by a former managing director of the yard.

  Q128 Mr Jones: The point being the point you are making about the continuation of employment but are you actually then saying that what the conclusion of RAND comes to in terms of return of surface shipbuilding to Barrow is a non-starter?

  Mr Hamilton: It is not a non-starter but the point that is being made is that submarine capability is unique and it cannot be sustained with a surface ship. Surface ship design is different from submarine design. Surface ship capability to build and maintain is completely different.

  Q129 Mr Hancock: There is going to be a gap.

  Mr Hamilton: If there is a gap then you are going to lose the sovereign capability. The practical point of all this, in my own backyard and Willie Rennie's constituency, when you took the maintenance of the submarine fleet away from Rosyth, it destroyed the infrastructure, the community and the educational processes to be able to have that highly skilled workforce in place. There is no requirement to maintain the level of employment in a yard that does not have submarine capability because the infrastructure and the overheads that are required because of the very nature of the work that is undertaken is not replicated and not replaced by surface ship work, and therefore the argument which says that these people can go and do other jobs in the community is a non-starter and a nonsense argument.

  Q130 Mr Hamilton: I will not ask the question I was going to ask. I am going to follow the theme that you moved on to. The real answer to Bernie's point is what are the unemployment levels in Dunfermline at the present time? They are pretty low. Can I ask the question to Terry because Terry is the one who indicated 3,500 jobs from a 70,000 population. Can I give you my background: 20 years in the pits, 80,000 of a population, 4,000 jobs, 2.5% unemployment now. That is the difference. The question I am putting is if Vanguard does not go ahead at all, forget the peaks and troughs, if a decision is taken not to proceed, how many jobs would be retained in there for decommissioning and what would be the position—and it has to come off and the question that Kevan asked has to come up—and are there alternatives? Rather than talking down the area, are there alternatives that you can move on to? The bleak position that you paint I painted 20 years ago as a Labour Group Secretary and junior official in my area.

  Mr Hamilton: As you would expect from a trade union, the answer that we would give on this is that these jobs are highly skilled and well-paid. Replacement jobs that have taken place within the UK economy—and this is the Amicus point in terms of retaining manufacturing within the UK—are not like-for-like jobs. They are replaced with poorer paid service economy jobs and yes, there will be regeneration, as there is taking place within Dunfermline High Street and within the West Fife area but it has taken ten years for that process to take place and the investment and money that is going to be required to put that back in place to take place. Yes, there is relatively low unemployment but it is not the same substantive jobs that are being replaced and they were never replaced in the mining communities either.

  Q131 Chairman: We are falling behind a bit but, Mr Waiting, do you want to add to that?

  Mr Waiting: I have fully taken on board what you have said but right now in Barrow-in-Furness there are 5,700 people on incapacity benefit. We have quite high unemployment for the area considering what we had throughout the 1980s when we were building the Trident, when it was actually going against the national trend and we had nearly full employment and the national trend was high employment. I do not know exactly where your coal mining community is—

  Q132 Mr Hamilton: Mid-Lothian.

  Mr Waiting: We have nowhere to go. As I said earlier, the nearest we can go for a job in manufacturing is about 100 miles away, and that is a 200-mile round trip for your maths. There really is nothing else to do. You mention decommissioning. We do not do de-commissioning in Barrow-in-Furness, we do not do scrapyard technology, we are not into that either, so there is nothing. I am not saying this to tug at your heart strings. It would be virtually the end of the road for Barrow-in-Furness.

  Chairman: Mr Waiting, you are now in deep difficulty because I think Linda Gilroy wants to ask a question about scrapyard technology.

  Q133 Linda Gilroy: We do not do scrapyard technology in Devonport! The Defence Industrial Strategy identified affordability as a key consideration in the decision on any future potential Vanguard and Trident successor. Can you tell us how your unions and members are helping to reduce cost and assisting in improving the productivity of the workforce? I think if I start with Mr Hamilton and we will go the other way round.

  Mr Hamilton: There is the evidence that Murray Easton gave which showed you the efforts that have been made since he was made the managing director at Barrow in terms of reducing the costs, of more efficiency, of greater capability and better use of public expenditure. That is where we have jointly worked together with that employer to do that and I think there is recognition in terms of the shipbuilding and ship repair industry—and I include submarines in that term—since that industry has gone through 25 years of severe pain, that we have to work together with the employer to make the yards as efficient and productive as we possibly can because that is the only way that these key capability skills are retained. Efforts have been made generally across the whole of the industry and I would want to point to the fact that as unions we advocated support, where there are peaks and troughs of work, and we went down and argued with our members that they should transfer to other yards to take those key skills. Therefore the learning curve that is required for a brand new worker or an electrician who has worked on houses and is put into a shipyard is taken away in terms of expenditure on shipyard electricians moving through from Rosyth through to Govan or through to Scotstoun. We recognise as trade unions that we have a role to play in that. However, the captains of industry have a bigger and greater role to play in terms of their interaction with yourself and driving down those costs. I think the Astute programme has showed that where they have continually put in place a programme to have year-on-year, end-on-end, project-after-project cost reductions. There will come a point in time when that will plateau and it will not be able to be sustained beyond that. After the first of class, as everybody knows, there is a huge learning curve up to first of class and then after that there are the efficiency and productivity gains, and I think the Defence Industrial Strategy drives you towards that.

  Mr Hazlewood: On the issue of affordability, the GMB believes that maintaining and improving the skills and qualifications of the workforce will improve productivity and also investment in new technology and new methods of working to help improve productivity will be an asset, so will incentive reward schemes. The GMB through the CSEU and a company called SEMTA has worked to establish a skills data base within the shipbuilding industry. They have done a trawl regarding the demands and the capabilities for the forthcoming CVF programme. The GMB also believe more co-operation between the shipyards, as my colleague has already mentioned, would help, and we are watching with interest the formulation of the new co-alliance and the sub co-alliance. That is to say the way forward and the way things pan out there.

  Chairman: I think I would like to move on to John Smith to talk about collaboration.

  Q134 John Smith: Part of this has already been covered, Chairman, but another thrust of the Defence Industrial Strategic is strategic collaboration—and you referred to it. How do you feel about that—companies working more closely together, the possibility of mergers? What is the unions' position on that?

  Mr Hazlewood: From a GMB point of view obviously we would welcome more co-operation between the shipyards on design and production methods. Once again I am referring back to the new co and the sub-co and we will see what comes out of that. We think that is going to be a way forward and it could only benefit the industry.

  Mr Hamilton: We are in favour of it. These projects are massive in terms of skills, investment, research and development, design, and therefore you have to have a substantive company. I think the Government was right in terms of their concerns about the flotation of KBR and the financial capability of that company in terms of support for the Devonport dockyard and the maintenance of a deterrent/the whole nuclear submarine fleet. There has to be a substantive size of industry to be able to support that kind of capital expenditure and to get the best value for the taxpayer on that capital expenditure. So we are fairly relaxed in terms of the Maritime Strategy, the Defence Industrial Strategy (which started that) and also the infrastructure review because there is a requirement for that to take place. Obviously we would have concerns in terms of impacts and in terms of areas and jobs, but at this point in time the lack of skills within the industry and the need for people to be employed outweighs that.

  Q135 John Smith: What about international co-operation? You referred to the Electric Boat role on the Astute. Could you see greater international co-operation between the UK and the US in submarines?

  Mr Waiting: We still continue to work with Electric Boat on various issues for Astute and, again, it is a two-way street. There is an exchange of ideas with the Americans. When the Committee was visiting the yard, I am sure that you were told that we are working very closely with our supply chain to make sure that affordability is there as well. Obviously there has got to be great care taken there because you can put people out of business if you put the squeeze on them too much. So the management team within the shipyard in Barrow-in-Furness is working with other suppliers to make sure that we are all singing off the same hymn sheet, so to speak, so we can get the price right so that everybody has got the employment that is required and we have got the capability for future ships and submarines in the industry. So there is a lot of time invested in this by senior management within BAE Systems and by other people.

  Q136 Linda Gilroy: The Minister for Defence Procurement has written to MPs with an interest in these matters in recent days expressing his concerns about how slow the consolidation is to come about. Mr Hamilton mentioned the KBR flotation. I just wondered if you would like to say a bit more from the unions' point of view about how that looks. I was going to ask a question about whether the companies and the shareholders are doing enough to make this happen.

  Mr Hamilton: Obviously we have meetings with government ministers as well and we understand the Minister for Procurement's strategy. Both myself and Keith have attended meetings with the Minister and we understand the vision that he has. On the view that says that we should not be using public procurement contracts to allow people to exit an industry and therefore for them to walk away with a bag of gold, I agree fundamentally with the Minister on that in terms of the proposed purchase by BAE Systems and BG of Fabric International. I think he was absolutely right that that was not the correct way. I think hopefully in the discussions that are taking place between BAE and BG, the Minister was painting a picture—and if I have got this wrong I have got it wrong—I think the picture he was trying to paint was of a substantive company in its own right being brought together in a joint venture if possible and, if not, working in collaboration, then this would be the next step in terms of having a joint venture. I think the concerns that were being expressed about the flotation of KPR were about the financial capability of that stand-alone company to continue to fund the infrastructure, the investment and the requirements that are needed to maintain that capability within the Devonport area. I think that is a concern and indeed I did not have the assurances from Halliburton in terms of KPR that that was going to take place. I have to say in our own practical experience there are a number of contracts out in the system just now that if that company had stepped up to the plate with financial assurances on, then Appledore shipyard would still be open, but that company has failed to step up to the plate and so therefore I think the Government do have a concern that if that is what has happened would that be replicated within Devonport.

  Q137 Linda Gilroy: Appledore is still open at the moment.

  Mr Hamilton: I understand that.

  Linda Gilroy: I just wanted to set that straight.

  Chairman: I am sorry, Mr King, we have let you off too lightly, David Crausby is just about to start on Aldermaston.

  Q138 Mr Crausby: I have some questions about Aldermaston. I guess Aldermaston is in a different situation in some respects from Barrow in that it is in a different part of the country and no doubt the alternative job prospects are better in that part of the world. What I am concerned about is specialist skills from the point of view of not just the employees but from the point of view of their retention in the interests of the whole of the country and in the interests of our deterrent. So what kind of work do Prospect members at AWE need to be involved in to sustain those specialist skills at the required level? To what extent could the skills of scientists and engineers at Aldermaston be utilised in the civil nuclear sector? Does the possibility of the new civil nuclear programme create any difficulties for us in the transfer and opportunities for skills?

  Mr King: I did say to Dr Stephen Jones when I was going to give evidence that I am not a scientist by any stretch of the imagination but I will do my best. Part of my role is I deal with the UKAEA, AEAT, and some of the regional authorities as well and also the JET project, which has got some publicity this morning. I think the skills are different because they are honed at AWE with a specific purpose. I noticed the question earlier about a global market for these skills—and I sincerely hope there is not a global market for nuclear warhead construction, and I would like to think that we do everything we can to make sure there is not! As I say, I am not a scientist but they are particular in the way that these issues are constructed and I was allowed to give evidence today because I do not know any secrets so I cannot give any away and it was the safest way of doing it! Apparently the difference in technology is very much to do with the delivery vehicle, which is obviously launched from the submarines and how it is designed to fit within the Trident missile itself is the clever bit, apparently, which is about as far as my science goes, so it is a particular skill. There are also elements about the life cycle of the products which are being used which are different. I will not go into detail about that because I do not know. They are very, very different skills from the skills of the majority of the members we have got who work, for instance, within nuclear power generation or in relation to the Fusion project because they are developing new technology, whereas the job within AWE is very much maintaining the current technology, it is very much a maintenance element. You mentioned about the area, the direct difficulty we have with the area is the fact that the scientific skills required and the salaries paid—and you probably knew that I was going to bring this in somewhere along the line—are not relative to the market rate. However, the majority of people do not come to work at AWE because they want to work in the commercial sector; they want to work in the public sector and maintain those terms and conditions, so the salaries are not at a high level. What is a high level, which reflects two things, is the wish of the scientists and engineers to develop a long term career and also to have security in employment, which is obviously something that is rare these days. The current problem that we face is that when we deal with the employer—with whom we do have a very good relationship and I know my colleagues' toes will curl when I say that—is that we are dealing fourth hand. We are dealing with the management group that is designated by AWEML, which then reports to the IPT which then reports to the MoD. For instance, with regard to the current problem that we have with the possibilities of an increase in contributions to the pension scheme, we have got no direct route in and that is definitely causing us a problem. On the longevity maintenance, the apprenticeship scheme that is AWE's is extremely good and, as I mentioned earlier about Reading University, does attract a lot of students across from physics and chemistry and other related sciences, so as far as maintaining it within the company is concerned we are doing very well but I do not think the skills are directly related, although I suppose the only one that would be is the safety element.

  Q139 Mr Crausby: Can I just ask you to say something about the impact of the Government's investment programme at Aldermaston? What impact has that had? Have you got any concerns about it? Has it had any effect on the skills base?

  Mr King: As far as I am aware from what I have seen, and I do not actually work there although I do visit a great deal, the majority of the investment programme has been on refurbishing the buildings which basically were constructed in the 1950s. I always make the joke that there are 4,000 people that work at AWE. Two of them design things and the other 3,998 are involved in safety, which I think is very good, but the site obviously has to be secure, it has to be safe, and that is the one key element. I think a lot of the investment has gone into refurbishing buildings. I do not mean putting nice chairs in. I mean ensuring that they are safe to contain the elements they have to contain, so I think the investment programme has been working well. We have had some development in relation to terms and conditions but obviously the latest issue around the pensions is of grave concern to us. If you look on the AWE website under the elements that they attract people to the company with, there are two things on the page and the first one is pensions, so it is a key element that we are currently having issues with.

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