Orders of the Day — Dockyard Services Bill

Part of the debate – in the House of Commons at 8:15 pm on 2nd December 1985.

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Photo of Gordon Brown Gordon Brown Shadow Spokesperson (Trade and Industry) 8:15 pm, 2nd December 1985

We are debating a proposal that destroys three centuries of dockyard service to the nation, threatens the readiness of our Navy for the task of peace and war and puts at risk the seagoing efficiency and the fighting effectiveness of 50 surface vessels and a score of submarines. The proposal has grave consequences for the future of jobs and conditions of service of a loyal work force of about 20,000 civil servants so recently and universally praised for their dedication in the Falklands campaign. When we debate these matters, the least that the House has a right to expect is not only the attendance of the Secretary of State for Defence and less filibustering from hon. Members such as the hon. Member for Tayside, North (Mr. Walker), but proper information, adequate consultation and a detailed justification, which was missing from the Minister's speech.

At best, we have had not a defence of the future arrangements for the royal dockyards but an attack on the present arrangements in the dockyards. There has been no argument in favour of the proposed management change. Instead, we have had the assertion that there should be a change in the management. The assumption that underlies every policy of this Government is that the public sector is wrong by definition and that the private sector is right because it is the private sector.

I remind the hon. Members for Bristol, East (Mr. Sayeed) and for Tayside, North, who are no longer present, that we are discussing a privatisation proposal that has been rejected by every Committee, including the Mallabar, Speed and Hudson committees, that has reviewed the future of dockyard arrangements since the war. The proposal has found no favour in any country that is faced with the responsibility of refitting, repairing and maintaining the most sophisticated naval vessels and submarines. Since its disclosure 18 months ago, the proposal has been opposed by every organisation and individual, almost without exception, that has examined it. As the hon. Member for Ilford, South (Mr. Thorne) reminded the House, since its publication, the proposal has evoked the unparalleled and unprecedented rejection of two senior Committees of the House and the outright universal opposition of the highly skilled work forces at Rosyth and Devonport. But this privatisation proposal is presented to the House almost unchanged since the original sketchy six-page prospectus was produced by Mr. Peter Levene.

The House must ask, and Conservative Members would also question if they were here, whether Britain will be better defended, more secure, safer and more efficiently defended if some of the most lethal weapons known to man are refitted by an untried operator working under untested arrangements with a work force of uncertain size over which there is as yet an unspecified amount of public control.

There is no clause or subsection in the Bill to prevent the work forces of Rosyth and Devonport from being run down to a core without any capability or capacity in an emergency. Nor is there anything in the Bill to prevent the franchises for Rosyth and Devonport from falling into the hands of a foreign cartel. There is nothing in the Bill to protect the Navy against the hazards of City and stock exchange finance, or even the coincidence of inernational crises and emergencies with awkward periods of contract changeover or inexperienced operators beginning their contracts. That is why one of the Minister's civil servants said to the Select Committee that the preferred option is the high-risk option for the Navy.

What conceivable benefits could justify the uncertainties and disruption of this privatisation measure? For six years, we have been told by the Government that the merit of privatisation is that it offers us a people's capitalism through individual share ownership and economy through competition. Yet if nothing in the Bill will achieve those objectives, if nothing in the Bill will permit mass capitalism by share ownership because no shares will be sold and only the franchise for the dockyards is on offer, if nothing in the Bill will extend real competition because with one Navy, only two dockyards and two companies in control the Ministry of Defence will inevitably be a captive buyer from private monopoly suppliers, and if nothing in the Bill will reduce the public sector borrowing requirement because all new investment in the dockyards will be the responsibility of the Government and not the private operator who takes over, we must conclude that the Bill represents privatisation for privatisation's sake, based on an unsupported assertion that the private sector is right only because it is the private sector.

The main purpose of the exercise—the only conceivable justification that the Minister could put forward for this colossal gamble with our Navy and our defences—is to cut costs and save cash. The original Levene report said that the purpose of the scheme was to save money. In the open government document issued a few months ago, entitled "The Future of the Royal Dockyard", the stated aim was the cutting of costs. In the Gracious Speech, the privatisation experiment was described clearly as being designed to secure value for money in spending on defence. Vice Admiral Tippet told the Select Committee on Defence that there would be "substantial savings" as a result of the changes.

What does "value for money" mean? What are "financial economies"? What are "substantial savings" in practice when, according to the financial statement in the Bill, the changes, are unlikely to have a major effect on central Government expenditure"? I remind Conservative Members of the point that I put to the Minister this afternoon. Even under the Government's most dubious reckonings, the minimum saving will be only £18 million, and the expected saving is only between £29 million and £33 million a year. When set against the alternative of a trading fund, which has been costed by the Government, those savings are reduced further to a minimum of only £10 million or, at best, between £21 million and £23 million. When set against the implementation costs of the scheme in redundancy payments, transitional costs and consultancy fees—we are told that implementation will cost about £60 million —the savings will be reduced by at least another £6 million a year, taken on a 10-year basis, and the savings then decrease to a minimum of £4 million, or £15 million at best. Since, in addition, up to £200 million will be paid to set up a private pension scheme, the conclusion that we must reach is that there will be no savings in 1987, no savings in 1988, no savings for the rest of the decade and that there are unlikely to be savings in the 1990s, if the scheme is properly costed, given all the additional initial expenses that are involved. There will probably be no savings even as we move into the first years of the 21st century.

It is hardly surprising that the Public Accounts Committee, concerned more with financial reality than with economic theory, was neither impressed nor convinced by the financial information produced by the Government. The PAC concluded that the evidence from the Ministry of Defence was among the worst we have received during this Parliament. The calculations given provided us with no valid bases on which to judge whether any increase in efficiency would result from the Government's preferred option. The Minister gave us new figures and new percentages on the core programme, including the costs that would be met by competition, the costs that would be met by fixed-price contracts and those that would be met by cost-plus arrangements. He appeared to say that fixed-price contracts would operate, but not for the first two years, not for 25 per cent. of the work in the next five years, not presumably for emergent work which could not easily be covered under the arrangements, and certainly not for unprogrammed work, which could not be covered under the present arrangements, and certainly not for unprogrammed work, which could not be covered under the present arrangements. Is it any wonder that when Touche Ross, the consultant to the Ministry of Defence, examined the proper financing of dockyards put into the private sector, it concluded that if it estimated what the dockyards would cost to run on a market basis, it had better include a 10 per cent. mark-up on existing prices for the profit margins that would be required by a commercial contractor? I presume that the document produced by Touche Ross is supported by the Ministry of Defence dockyard planning team, in whose name it it published.

The Government's argument is that throughout the exercise there will be substantial savings and no risk. The truth is that there will be no savings and substantial risks.

My right hon. Friend the Member for Blaenau Gwent (Mr. Foot) mentioned the Admiralty Board, which seems to be the only respectable supporter that the Minister can claim for his scheme. My right hon. Friend cited Rear Admiral George's evidence to the Select Committee on Defence, when he said: It is largely the pressures on the defence budget which have led the Admiralty Board to consider matters of saving money. The Board went even further in its evidence and said that it could see the benefit to the Navy in terms of the release of resources which should be capable of being used for front-line activities within the Navy. The board supported the proposals because the Minister told it that the scheme would produce savings. I understand that the Admiralty Board is not composed of simple sailors who might be expected to succumb to the wiles of a City operator, even one dressed for the occasion in a combat jacket. But the board has been taken in by the glossy financial prospectus passed round by the more dubious variety of secondary banks and, having been thoroughly misled by the Minister, now discovers that its puzzled assent to the scheme is about the only evidence that the Minister can cite in his favour.

If the Government cannot tell us where the scheme will produce savings, should they not tell us about the risks that it involves? In a matter so grave as national security, the House has a right to demand and to expect proper safeguards. But where are those safeguards in the Bill? Where are the safeguards to ensure the maintenance of a strategic minimum capacity? Where are the safeguards that we shall maintain an emergency capability in the dockyards at times of international crises? There is nothing in the Bill about that. Where in the Bill are the safeguards on nuclear safety, when the responsibility for radiological protection will be with the contractor who takes over the dockyard and the responsibility for the removal and transportation of nuclear waste and radioactive substances will be with the Ministry of Defence?

Where are the safeguards in the Bill to prevent our submarines from being refitted fender to fender with Russian trawlers? That is unknown in the public sector, but is clearly known in the private sector, because only a few months ago the submarine HMS Otter was photographed undergoing a refit on the Humber side by side with a Russian trawler. If there is a bar on countries that are unacceptable for strategic reasons for giving their naval refit work to the newly privatised dockyards, the dockyard planning team and Touche Ross seem to be unaware of it. Why did Touche Ross, presumably on the information given by the dockyard planning team, say in the report simply that the Communist world was "virtually certain" never to wish to negotiate the use of the dockyards? It says not that they will be banned from using the dockyards, but that they are almost certain never to wish to use them. In other words, the reason that there will not be Russian trawlers in the dockyards is not the Government's unwillingness for ideological reasons, but the unwillingness of the Soviet or Communist bloc to use the dockyards.

Why are countries that are wholly unacceptable to us, such as Chile, South Africa and Argentina, cited in the document as only "unlikely" to be wanting work done within the dockyards? Why is it said that, even though they are unlikely to want major refits in the dockyards, they may require specialist refit work to be done? Is it not amazing that the dockyards planning team has put its name to a document that says that it is possible that specialist refit work will be done on behalf of Argentina, a country with which we have no diplomatic relations, or South Africa, which has been condemned in the House and elsewhere?

Will Britain be better defended if the other countries listed require naval refit work to be done in the newly privatised dockyards, or if Chilean, Pakistani, Bangladeshi, Indonesian or Algerian frigates or sub-marines are refitted side by side with our independent nuclear deterrent at Rosyth? The Minister may say that this is not possible and that the Government will not allow it to happen, but there is nothing in the Bill to prevent such an extraordinary situation emerging and nothing in the advice that Ministers have given to the dockyards planning team to prevent it happening.

There is another even more important point that Ministers seem to have overlooked. Where are the safeguards about continued British ownership of companies awarded the franchise, which may even be trusted with the responsibility of refitting the Polaris nuclear deterrent? There are no safeguards in the legislation about foreign control of the companies that will allegedly run the royal dockyards. We cannot anticipate safeguards even in the contracts or the articles of association, for even with the proposed golden share there can be no safeguards that are finally binding on the operating company.

While a golden share may prevent Rosyth plc or Devonport plc falling into the hands of foreign shareholders, it can do nothing to prevent the company which holds the franchise—the major operating company awarded the franchise by the Government, the Balfour Beatties, the Weir groups, or the Thorn EMIs—from falling into foreign hands. Assurances from Ministers about what may happen are not enough if they are not prepared to stipulate in the legislation that the contract will be removed from any dockyard company at either Rosyth or Devonport if a certain number of shares in that company fall into foreign hands.

This is what Tory patriotism now means. In their effort, because of their enthusiasm for privatisation, to transfer the dockyards from public control to private control, Ministers are prepared to contemplate the final transfer of the dockyards from British control to foreign control. That is the end effect of the Bill's proposals, if they are not changed.

Let us consider some of the other assurances missing both from the Bill and what the Minister said today. Where are the assurances sought by my hon. Friend the Member for Dunfermline, West (Mr. Douglas) about the continuation of apprentice training for the dockyards? What possible initiative will there be for a private company working on a seven-year contract to maintain the levels of apprentice training at the dockyards that have been vital for the maintenance and development of the local economies? Where are the assurances of proper public audits of what happens in the dockyards under private control? Where are the assurances about the proper line of separation between a dockyard under private control and the naval bases under public control? As long ago as 1971, the Mallabar committee identified this as a major problem in examining any agency management scheme.

Where are the assurances about the role of dockyards under private control in the serious matters of nuclear safety and war planning? Some 18 months after Mr. Levene produced his original document, a year after the Minister said that he would be prepared to go ahead, nine months after the Admiralty Board was duped into saying that no risk was involved because it thought that there would be savings, and six months after the Government approved the privatisation and said that they would introduce legislation, none of the problems has been solved. Some 18 months after Mr. Levene reported, there are now 19 committees in the Ministry of Defence examing the fundamental issues about which we warned 18 months ago, the resolution of which is at the heart of the viability of the scheme and at the heart of whether the nation can, for security reasons, afford to go ahead.

When the Ministry of Defence committees report, the only answer that they can give is that we must simply hope and pray that international crises and emergencies such as the Falklands do not coincide with awkward periods when one contractor is being replaced by another. We must hope and pray that the crises that may arise do not coincide with an untried and inexperienced operator starting on a new contract. We must hope that the crises do not coincide with there being a competitor at the end of the term of his contract, just waiting to get out and with no reason to put his resources into doing the job.

We must also hope that the dockyards will not be held to ransom by a private monopoly supplier refitting the nuclear deterrent or any other frigates or submarines. We must hope and pray that the dockyards can quickly adjust if the City sneezes, a company goes under, a dockyard consortium collapses and at short notice we must regain public control.

Let us remind ourselves what might have happened if the enthusiasm of the Secretary of State had excited the Cabinet as early as 1979 and if the Cabinet had convinced itself of the merits of a dockyard franchise. What would have been the consequences for the Navy's unpredictable requirements in 1982 if we had been engulfed in the first changeover and if a new operator was learning by his mistakes, at our expense? What would have happened if the operator was incapable of rising to the occasion, if hundreds of men had been sacked and there was no capability to deal with emergency refits that had to be done to get the Falklands fleet to sea, or if the Navy was simply held to ransom by prices being demanded by the private supplier for unprogrammed work? What would have happened if, because of the new commercial disciplines applied to the dockyards, managers and men refused to work night and day as they did during the Falklands crisis to get the fleet to sea? Might the Navy, just because of the vagaries of the Stock Exchange, have found itself conducting the Falklands war over the debris of the bankruptcy of Rosyth plc or Devonport plc?

There are no watertight safeguards written into the Bill about the protection of our strategic defence or about our ability to respond in a crisis. There are no safeguards and guarantees because there can be none when the purpose of the exercise is to subject the dockyards, our last line of naval repair and maintenance, to the risks, uncertainties and vagaries of the market economy.

I accept that the Navy recognises that this is a problem. When it was asked in the Select Committee by my hon. Friend the Member for Dunfermline, West what guarantees there were about the refitting of our strategic nuclear deterrent in the case of emergency, the whole argument about commercial management was exploded. The Navy spokesman told us at that Committee that we were not to worry. We were told: There is no reason why the existing management at that level should change. Having decided that the existing management should be revolutionised by privatisation, the Navy now seeks to reassure us that the principal safeguard for the Navy is that the management will not change. That is a guarantee that the Navy spokesman could not give, because they are in no position to give any guarantee about the management that would be involved in the nuclear deterrent or any other project under a privatised operation. If the real safeguard for getting our frigates, submarines, destroyers and Polaris out to sea is that management will not change, what is the argument for a change in management?

During this debate, the dockyards have been subjected to some criticism, especially that levelled at them by the hon. Member for Tayside, North. When Conservative Members criticise the dockyards for their productivity they should remember that the productivity of the Devonport dockyard has, according to Navy spokesmen, increased by 17 per cent. over recent months, and that productivity at Rosyth dockyard has increased by 15 per cent. over recent months, and done so while the dockyards have remained in the public sector.

When Conservative Members seek to criticise the dockyards for their inefficiency, they would do better to look at the comparisons between the public and private sector. The hon. Member for Tayside, North seemed to forget that only a few weeks ago, in one small minor refit, Rosyth dockyard had to pick up the pieces after 28 defects were identified following the refitting of a frigate in the private sector.

When Conservative Members consider the comparison between the public and private sectors they should remember that every report since the war, while critical and asking for improvements in dockyard management, has asserted clearly that the dockyards have no rival in the private sector for cost, efficiency and ability to deliver on time.

The Government are putting forward the proposals only because they believe that the private sector is better as an act of dogma. They should remember that Rear Admiral Leach, formerly head of the fleet, not only praised the dockyard work force for what they did in the Falklands campaign but asked Ministers, in a letter in the Financial Times a few months ago, how, after all the effort that had been put into the dockyards, they could justify their being kicked in the teeth.

What has changed in the dockyards since the Speed report, the Hudson report and the Mallabar report concluded that agency management was unacceptable? What has changed since the Mallabar report concluded that agency management was the way to get the worst of both the commercial and Government Department worlds?

What has changed since the Speed report concluded that the disadvantages of agency management were that the management would have little incentive to make itself more efficient, while the usual justification for an agent was that he had the resources and skills of the parent firm to fall back on, something which would not exist when the dockyards were privatised? What has changed since that report said specifically that the contracts put out for agency management could not lead to competition and genuine incentive but would lead to confusion over who was responsible for what"? What has changed since that report said that there would be no guarantee that An agent would provide the capacity to meet urgent and unprogrammed work to maintain the operational capability of the fleet, or that the Secretary of State would retain his flexibility to move work between the royal dockyards?

What has changed since the Mallabar report, the Speed report and the various other reports? Is it the role of the dockyards that has changed? Is it the Navy's demands that have changed? Is it the sophistication of the refitting exercises that has changed? Or is it simply that the Government Front Bench has changed, given the obsessive desire of its members to pursue privatisation at any cost and to prove that anything can be privatised, including the royal dockyards?

The Secretary of State has put forward a scheme whose very basis criticises a loyal, efficient and dedicated work force. It is a work force that was not only praised for what happened in the Falklands campaign and which has not only increased productivity over the past 18 months by the figures that I have mentioned. It is a work force that has said clearly that it is prepared to consider proposals for change as long as the Minister removes the threat hanging over the dockyards under the Levene proposals. That is not a work force that is inflexible and resistant to any change, but one that is rightly resistant to the unilateral imposition of change by a Minister who is unprepared to consult, unwilling to listen and has not even bothered to have meetings with the unions in any detail over the proposals that he puts forward.

On the other side we have a Secretary of State for Defence who is not really a Secretary of State for Defence but simply a Secretary of State for the defence of the private sector. He prides himself on his patriotism but he is ready at any time to subordinate the interests of national defence to those of commercial gain. Dogma rather than evidence tells him that the dockyards have only one outstanding feature which is their principal shortcoming and that is that they are not run by the private sector. He has convinced himself that the dockyards can be put right only by applying the dogma of privatisation. Somehow he believes that what is good for Plessey, Babcock and Thorn EMI is automatically good for the British Navy, when he knows perfectly well that the first loyalty of the cartels and consortia who will take charge will be not to the fleet but to their companies' balance sheets.

There are more than 8,000 public servants at Rosyth and more than 12,000 at Devonport who have been forced by the Government's misguided policies to the front line of a privatisation war that they did not seek. They understand that the national interest is more than the sum of the private parts of the economy. Their loyalty, dedication, years of service and sense of the public interest is well known and well understood here and in Britain. Throughout the past 18 months the Minister has sought to justify the privatisation scheme by promising the Navy Board and the country that he would achieve savings. Now that that argument clearly cannot hold up after the evidence to the Select Committee on Defence and the Committee of Public Accounts, what possible justification can the Minister give us for proceeding?

Labour Members will continue to oppose what is a reckless gamble with the nation's defences and the country's jobs. We shall have the unanimous support of the work forces at Rosyth and Devonport. We believe that during the period of consultation we have gained the support of people who have hitherto been adherents of the Conservative party. We can see tonight that those Conservative Members who have bothered to study the implications of the scheme will vote against the proposals when they are put to the vote.

We believe that in Committee, when the Government are forced to face the arguments about cost and the lack of proper safeguards inherent in the Bill, they will have to change tack. At the very least, we expect the Minister to answer the questions being put to him by Labour and Conservative Members. He should tell us what capability will remain in Rosyth and Devonport dockyards to deal with an emergency. He should tell us what he proposes to do to prevent foreign control of the companies which run the dockyards and what arrangements he will make to prevent foreign naval refits being carried out side by side with refits of our frigates, submarines and nuclear deterrents. He should tell us what he means about the likelihood of jobs and apprenticeships remaining in the dockyards under the contracts that are brought into being. Above all, he should tell us the truth about the real cost of this scheme to the defence budget and to the public expenditure budget.

If the Minister of State told us the truth about his proposals for the defence of the nation and for jobs at Rosyth and Devonport, there would be not one or two but a large number of Conservative Members joining us in the No Lobby tonight. That would make it impossible for him to proceed with the Bill.

The Bill is bad for the Navy, for the work forces at Rosyth and Devonport and for the country as a whole. The Minister of State would be doing a service to the country if he withdrew his proposals.