Public Accounts

Part of the debate – in the House of Commons at 7:07 pm on 24th October 1985.

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Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West 7:07 pm, 24th October 1985

I should like to take up what the hon. Member for Lancashire, West (Mr. Hind) said about regional policy, but I shall resist the temptation. I only hope that no one will follow his advice to transfer the payment of grant from the Department of Trade and Industry and the Scottish Office to the Department of Employment. We have enough difficulties already.

I shall concentrate on the 24th report of the PAC in 1984–85, which deals with the dockyards, and couple it with the fourth report of the Select Committee on Defence in this Session. We are talking about efficiency, and I make the mild suggestion that we should reconsider how we deal with these reports.

We have seen in the House a contrast between today and yesterday. The House was operating as a debating chamber yesterday, with the cut and thrust of highly charged political debate, with a large number of hon. Members present. It was enjoyable and, on occasions, enlightening, and the media lapped it up.

Today, we are dealing with a plethora of reports and there is an absence of cut and thrust. For example, the 24th report of the PAC, which is Government dominated—rightly so, given the way that we do things—was a unanimous report. Like the report of the Select Committee on Defence, it looked searchingly at the control and operations of the dockyards, a subject on which we have also had a plethora of reports in the past 10 to 15 years. All have suggested changes. All have questioned the efficiency of the Government. But for the first time we have a Government very clearly preferring an option—a commercial option—which came to us almost out of the blue and emanated from a rather sparse study undertaken by Mr. Peter Levene who, at the time of the study, was a specialist adviser to the Secretary of State.

One of the things that we expect, if we labour in Select Committees, is to be listened to by the Departments concerned. We do not expect them to fall over backwards to agree with the strictures of either the Public Accounts Committee or the Select Committee on Defence, but we expect to be listened to.

The Public Accounts Committee had a Government majority as, of course, did the Select Committee on Defence. The latter has some very well known Left-wingers on it. The Chairman is a former Minister, the hon. Member for Ashford (Mr. Speed) is a former Minister, and there are several other former Ministers, including some who have been concerned with defence. That Committee overwhelmingly questioned the Government's preferred option.

But what happened? Almost before those Committees had submitted reports to the House—to be fair, a little time elapsed—the Secretary of State for Defence came along on 24 July and said, "No matter, we are going on. I am going on with the preferred option."

A management team is currently devoting valuable time ushering certain contractors through the dockyards. Some of us have the names of those firms. Perhaps the Financial Secretary to the Treasury will tell the House the names of the firms that are going through the dockyards at Rosyth and Devonport at the present time. The Government have commissioned a voluminous report by Touche Ross, showing what assets can be hawked round.

All this is against the background of the reports of the Public Accounts Committee and the Select Committee on Defence. It means that Members have, in a way, laboured in vain. I hope that I am wrong. I am an eternal optimist. Even at this juncture I hope that the Financial Secretary, who is really, if I may say so, a pragmatic type of gentleman, will ask himself, as he certainly ought, whether we will get value for money, whether it really is efficient and whether it will work. Will the Government's preferred option of commercialisation work?

Perhaps I can explain briefly what this preferred option desires to do. The idea is to keep the capital assets of these dockyards in the public domain so that they will still have the stricture of a vote. The Ministry of Defence and the Treasury will still have their hands on that vote. The concept then is to create two companies, one for Devonport and one for Rosyth, which will be labour-only companies. We will put the labour of the dockyards into two companies for which outside contractors will bid. They will bid for the companies and they will bid for the Navy contracts, or a substantial proportion of the refit and maintenance work allocated through the Navy Board.

The Public Accounts Committee has examined this matter. I pay tribute, as others have done, to the work of the PAC. I was a member in a previous incarnation, and I am in a way sorry that I did not enjoy the chairmanship of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), but I served under earlier Chairmen who are not now in the House. One was Joel Barnett, now Lord Barnett, who is in another place. They were excellent Chairmen, who gave valuable service to the PAC. We have asked in both these Committees whether it will work.

In the evidence given to the Select Committee on Defence, my right hon. Friend the Member for Dudley, East (Dr. Gilbert), a former Defence Minister, at question 411, asked: Would you describe this Government's preferred option as a high risk option? Dr. Harte, of the Ministry of Defence, replied: Those are the words I used and I would stand by them. What I was implying was, if you ranked the proposals which are now put in by the Government in order of risk, then I think it is true that the commercial management option is at the top of that list. On the other hand, if you ranked them in order of potential financial benefits, the commercial management option is already at the top. So it is a high risk giving notionally high rewards.

What are these high rewards? What does the Public Accounts Committee say about the nature of these rewards? I quote from its report, paragraph 10: We note that the net savings may be as little as 3 per cent. of the total Dockyard annual operation costs over a 10 year period, after allowing for the costs of implementing commercial management and the contractors' return on capital employed, although MOD stressed this was a worst case and expect that they will be higher and will increase after 10 years. Over and above those from the Interim Management Measures…the savings may be as little as 1 per cent. There is an additional submission showing certain figures that are being submitted in answer and that is cited on page 6. There is a supplementary note by the witnesses which gives some additional information. Nevertheless, savings are really minuscule and not backed up by any figures whatsoever.

What are we putting at risk? We are putting at risk the ability to put to sea a viable naval force in any and all circumstances that might prevail. That is a large consideration.

I know that the Public Accounts Committee does not normally undertake visitations. I do not think that the practice has altered since I was a member. Its members take the view that their responsibility is to hear witnesses, take evidence and come to their conclusions. The Select Committee on Defence does not have that circumspection. We have visited certain dockyards. Yesterday some of my colleagues and I visited Portsmouth. Here the Government have taken a different view of operations. They closed Chatham and ran down Portsmouth, but even there one can see the complexity of refitting vessels. Some of the Ministers ought to visit the dockyards. I do not suggest that they do so in the next week, because they may get a pretty rough handling if they go to Devonport or Rosyth. But if they go even to Portsmouth — and I say it with no disrespect to Portsmouth—they will see the complexity of the procedure.

We were on a County class destroyer yesterday — a rather old ship. There is no way that that type of ship could be put out to a commercial yard. It may be that the Chief of Fleet Support and Rear Admiral George or the Chief Executive, Royal Dockyards, will contradict me, because I have been rather a long time away from this as a Clydeside fitter. But let us see the sort of test that the Government have made. They have asked for a compex examination. That is what they call it. They have put out for private tender an Oberon class submarine, Euryalus, and they will then be able to make some comparisons. However, these comparisons will not be available until after 1987. The full evidence will not be available either to the House or to the Department until that time.

What has happened to the Otter? When we questioned Rear Admiral George in the Select Committee on Defence we heard the tale of the Otter's propeller. The work could not be done in a commercial yard. Rosyth is having to deal with HMS Red Pole. The estimate for that work at Rosyth was 20 weeks, so it was decided to put the work out to Richards, a commercial yard, where the work could be done in 16 weeks. The deficiencies after the commercial yard had had a go were so mind-boggling that it was decided to try to send the ship to Rosyth.

I do not excuse my trade union colleagues, but, not unnaturally, the boys and girls in the yard resented that. The Government have ideas of how to proceed with the dockyards, but they are completely untested. No other country adopts their style and practice. The United States certainly does not. The Government are putting at risk the viability of our naval force.

Perhaps the Navy and the dockyards have had too cosy a relationship over the years. Perhaps the dockyard men have been trying to do a Rolls-Royce job to ensure that, to the best of their ability, when a ship goes to sea it never breaks down. That. is erring on the right side and recognising that men's lives are at stake. That cannot be measured in terms of profit and return on capital. I know that we must press for efficiency, but that must be balanced against putting men's lives at risk and against back-up.

The Government do not even intend to examine carefully the lessons of Portsmouth. Perhaps the Select Committee on Defence is at fault because it did not examine the matter until a few days ago. The Select Committee as a whole has not yet taken a view. The Government are not awaiting the results from the Otter and Euryalus. The real culprit is the Secretary of State for Defence, although the Treasury is also involved because its aim is to reduce the number of civil servants. The main aim is to take people out of Civil Service employment and to put them in the private domain. The Government are not concerned with making the Navy more efficient.

I am a member of the Select Committee on Defence, but I have seen the work done by the PAC. I believe that the House and the nation should resent what is happening. The Government are paying no attention to the strictures of the senior Committee of the House—the PAC—or of the Select Committee on Defence on which they have a majority. The Committees do not take a political view. They are saying to the Government. "You have not proved your case, so, until you do, halt." We have had no response from the Government.

I suspect that the Gracious Speech will contain a commitment to introduce a Bill for the commercial management of the dockyards. Such commitments do the House and politics great harm. Government Members will troop dutifully through the Lobby in favour of that. Unfortuntely, many of my right hon. and hon. Friends and other hon. Members will not have read the reports and they will take a decision in accordance with the balance of political votes.

Two Commitees have said that the Government have not proved their case. I apologise to my right hon. Friend the Member for Ashton-under-Lyne for not being present to hear the whole of his speech, but he said that some of the worst evidence that he had heard was about the dockyards. In the Select Committee on Defence only one of the many witneses was a non-MoD man. I cannot say that his evidence was good. It was a rather appalling support of the Government's case.

The Financial Secretary is responsible for the effectiveness of Government spending. He should examine what is happening and look at the end product. Is he willing to have all this on his conscience because of disruption in the yards, with no tangible benefits or savings?

Perhaps the Government are planning to privatise the Navy. I would not put that past them. Unless they plan to do that, they must remember that the customer is in the public sector and the assets will remain in the public domain. The Secretary of State's doctrinaire view puts at risk the effectiveness of the Navy as a fighting force. Anyone with any sense of patriotism or public responsibility should resist that.