Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Margaret Beckett
I agree in part with the hon. Lady. I take her point entirely that we are really interested in the future, but let us not overlook the fact that we have barely started. The procurement process has not concluded. All that has happened is that a preferred bidder has been identified and negotiations have been opened. The hon. Member for Amber Valley referred to the intercity express programme contract. In the hands of the Department for Transport, that went to Hitachi, but the contract for that has not yet been signed. Indeed, just before the election the previous Government ordered a review of that contract, and this Government have substantially renegotiated it. We are very far from the conclusion of this bidding process, so although I share the hon. Lady’s view entirely that we should look to the future—I will come to that issue in a second—to secure that future we must not abandon the prospect of changing the present circumstances and the award of this contract.
One concern about the attitude that the company is likely to take relates precisely to the issue of opportunities for the future. If this procurement goes ahead, we may lose the opportunity of an offer made by Bombardier. As I understand it, it has decided at the highest level to establish a worldwide centre of excellence for the design and manufacture of new cars for high-speed trains, for future procurement—of exactly the kind referred to in the debate. Bombardier was prepared to site that worldwide centre of excellence in Derby. That offer was, in effect, thrown back in its face. That concerns me greatly. We would be talking about more jobs—jobs with even higher skills levels than we see now, and with the potential for new technologies. Although I and many in my party applaud what the Cabinet and the Prime Minister said in my Derby constituency about manufacturing, skills and the need to rebalance our economy, the skills base in our city is not just Bombardier; it is also Rolls-Royce. We are a strong manufacturing base, but that base depends on the interaction between those two companies, among others, on the supply chain, and on their ability to work together to establish and maintain that skills base.
The Minister of State, Department for Transport (Mrs Theresa Villiers)
Does the right hon. Lady acknowledge that the Government of which she was a member set the criteria for the procurement, and that there is no way for this Government simply to ignore the Siemens bid and give the contract to Bombardier? We are bound by the criteria and by European Union rules and we cannot simply rip up the process. Is she advocating that we stop the procurement altogether and start afresh? That would delay considerably the Thameslink programme—which we inherited from the previous Government already running 16 years late—and we would still have no guarantee of Bombardier being the winner at the end of the new procurement process.
Margaret Beckett
I am sorry that the Minister decided that this was a good time to make that party political point, when all of us are present to get her and her Department to change their minds and look afresh at all the implications. We all know from our constituents that there are very real questions about whether the right decision has been made and whether proper account has been taken. We have talked about the financing so far, but we have also touched on whether the vehicle is fit for purpose and whether Siemens—although it is a fine company with a great engineering tradition—has the capacity to supply the trains needed.
I am genuinely quite sad that the Minister made that point. As the storm has arisen, not only in the Derby area but in the north-west and elsewhere, we have been inundated with requests from people throughout the country, with other Members and members of the public asking, “What can we do to help? This is a mad decision and none of us agrees with it.” However, for some days I have had the feeling that, to get the Government off the hook on which they so far seem determined to impale themselves, some have been saying, in effect—I am prepared to exempt the Minister—“If we can palm off the blame for this on to the previous Government, then we don’t need to look again at the decision.” I am sorry, but that will not wash this time, because of genuine concern about how the financing was handled, about the train, about the lost opportunity for new manufacturing in the UK and about the knock-on effect on Rolls-Royce. This is not a done deal.
The hon. Member for South Derbyshire (Heather Wheeler) referred to the chair of Bombardier in the UK going to South Africa with the Prime Minister to promote British exports. I would not blame him for viewing the journey with some irony. In South Africa, they will be travelling on new trains, made by Bombardier for South African Railways, which felt able to award that contract. We can all ask why Bombardier could win that contract, but not one in this country.
We are very much at the opening stage in the process of negotiating the contract. The Government have only recently taken delivery of the McNulty report, which also considers the supply chain; we have hardly touched on that yet this morning, but the implications throughout the country are enormous. Genuinely, I say to the Government that this decision is a mistake. I do not accept the simple case that they have put because, as I pointed out, there were opportunities for the Department to look at the financing, but let me take a step back from that. They can blame it on us if they like, but they must change the decision—that is what matters.
The Minister of State, Department for Transport (Mrs Theresa Villiers)
It is a pleasure to serve under your chairmanship, Mr Gale. I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing a debate on this important issue. I welcome the contributions that he and other right hon. and hon. Members have made on this issue, which is important for Derby and the UK. I emphasise that the Government fully understand the concern that is felt. We, too, deeply regret the job losses that are under way in Derby, and we, too, are determined to do what we can to help Derby and Bombardier.
We recognise that Bombardier was hugely disappointed not be made the preferred bidder for Thameslink, but the procurement was set up and designed by the previous Government. Although we were left to open the envelope on preferred-bidder status, they set the criteria against which bids had to be judged. We are legally bound by the criteria set by Labour at the beginning of the process.
We are also legally bound by European law to judge bids on a completely blind basis. Under EU law, domestic and overseas suppliers must be judged impartially and on a wholly equal footing. Against the published criteria we inherited, the Siemens bid clearly represented better value for money.
We cannot make the location for the proposed manufacturing part of the criteria. Contrary to what the shadow Secretary of State, the hon. Member for Garston and Halewood (Maria Eagle), said, it was not a criterion for preferred-bidder status in the IEP contract that Hitachi set up a factory at Newton Aycliffe, although it has chosen to do so.
In response to a number of points made by different hon. Members, I should say that we could not simply rip up the procurement started by our predecessors. That would leave the Government at risk of facing damages in the courts and lengthen the delivery of Thameslink, which, as I have said, and as hon. Members have acknowledged, was already running 16 years late when we inherited it from the previous Government. There was no legal way we could simply ignore the Siemens bid and hand the contract to Bombardier; it simply is not in our legal power to do that.
Maria Eagle
Is the Minister really saying she has no power in this matter? She is the Minister.
Mrs Villiers
I am saying that, as the Minister, I need to abide by the law and by our obligations under the European Communities Act 1972 and the treaty of Rome; I am afraid I have no choice in that. Going forward, we of course recognise the need to examine wider issues about whether the UK approaches the application of EU procurement rules in the right way and achieves the right balance of risk. Similarly, I agree with my hon. Friend the Member for Amber Valley that we need to see whether our approach is consistent with those used in other member states. That is why the issue will be considered as part of the Government’s growth review.
Nigel Mills
On that point, I would like to draw my right hon. Friend’s attention to another quote from Mr Scrimshaw, who is the head of Siemens’s train building in the UK. Rail Professional asked whether he would ever look at building in the UK, and he replied:
“I wouldn’t rule it out. Currently, all the tenders from DfT don’t include requirements for UK manufacture. We have a model that works quite well.”
It seems that Siemens did not entirely rule out the possibility that such a requirement might exist. Perhaps the Department could look at that in future.
Mrs Villiers
Even if we had designed the criteria, it remains the case that we could not have made the location of the manufacturing process a condition of successfully achieving the contract; that is simply not permitted by EU law. However, I totally deny the allegation that the Government are sitting back and not taking action. I agree that we need to take action to help Derby and Bombardier. The reality is that Bombardier advised the Department for Transport that it expected to make more than 1,000 redundancies, regardless of the outcome of the Thameslink procurement, because several of its orders are about to reach completion. However, whatever the reason for the redundancies, we want to try to help Derby and the surrounding area at this difficult time.
As a result of the review by Bombardier of its UK rail operations, the Business Secretary has set up an economic response taskforce. It will he headed by Margaret Gildea and its remit will be to mitigate the economic impact of job losses at Bombardier, in its supply chain and in local communities. It will draw on representatives from Derby city council, the county council, Derby college and the Skills Funding Agency. Jobcentre Plus will also deploy its rapid response service, to support workers who will be affected. That is in addition to the work on skills that the Government have been involved with in Derby in partnership with Rolls-Royce and Bombardier, and the support that the Department for Transport is giving to the National Skills Academy for Railway Engineering, which my hon. Friend the Member for South Derbyshire (Heather Wheeler) mentioned. We shall do our best to help Bombardier to get the overseas contracts it is bidding for, such as in South Africa. That is one reason why representatives from Bombardier will accompany the Prime Minister on his visit to South Africa, which is coming up.
Margaret Beckett
I should not be a bit surprised if those representatives make the point that it will not help them to gain confidence overseas if they cannot get contracts at home.
I want to raise a point that has been made in several quarters, about the job losses. I, too, have seen the letter from Bombardier to the Secretary of State. It makes two things clear, one of which is that, indeed, as no one has attempted to deny, there were temporary, short-term contract jobs that were due to come to an end, which is a pity. However, it is also clear that more than 400 skilled engineers and designers are being made redundant now because of the loss of the Thameslink contract. Also, I know that the Department has been aware for some time, as I hope Ministers have, that Bombardier has made it crystal clear that if it did not get the Thameslink contract, not only would the new jobs not be coming, but those 400-odd would be the start of the process. It is not right for the Minister to pretend that all those jobs were going to go anyway. That is just not true.
Mrs Villiers
As I have said, whatever the reason for the job losses, it is important that we should work together to help Derby in this difficult time.
Mrs Villiers
No. I am afraid I have only a few more minutes, and a long list of points to get through. I want to try to respond to my hon. Friend the Member for Amber Valley.
My hon. Friend was concerned that in some way the Department for Transport discriminated against Bombardier. Absolutely not. We fully respect the excellence of the engineering facilities at Bombardier. We are determined that it should be judged on an impartial basis, so there is no question of any predisposition against Bombardier, or any discrimination.
Several hon. Members have expressed concern about the combination of long-term funding and maintenance and whether we should take the approach to procurement in the future of judging each procurement on its merits. It was not possible to sever those elements of the bid process from the criteria we inherited from the previous Government. They combined long-term maintenance and funding, and it would not have been possible for us to sever those criteria and start again, for the reasons I have given.
My hon. Friend the Member for Amber Valley thought that there was a case for leaving more procurement decisions to the train operators and the rail industry. I agree on that. He also asked about the margin between Siemens and Bombardier. I am afraid that that is commercially confidential at the moment and I cannot share it with the House. It would not be in the interest of Bombardier, Siemens or the taxpayer for me to do that. Several hon. Members, including my hon. Friend and the shadow Secretary of State, have expressed concern about the Siemens bogie. That has been evaluated. The bogie is based on proven technology used elsewhere. Its development began in 2007 and it is expected to have undergone about 1 million miles of testing before it goes into passenger service. As to concerns about peaks and troughs in rolling stock orders, yes, we need to consider that in future, and we shall do so as part of our consideration of the McNulty review.
My hon. Friend the Member for Mid Derbyshire (Pauline Latham) spoke passionately and movingly about the impact of job losses. She asked about a meeting with the Prime Minister, and he has asked the Business Secretary to meet Councillor Philip Hickson of Derby city council. In answer to the question of the hon. Member for Derby North (Chris Williamson) about assessment of the position in Germany and France, we looked carefully at their approaches, and will also do so as part of our growth review. As to whether we will publish the results of the value for money assessment of the Siemens bid, it is not possible at this point, as I have said, to publish such commercial details, because they are commercially sensitive. The hon. Gentleman asked what legal advice the Department obtained on changing the invitation to tender. As I have made clear, we are legally bound by the criteria we inherited from the previous Government, and those were thoroughly assessed by our legal advisers.
Mrs Villiers
No, I am sorry. I have a lot of points to make, and I propose to make them.
My hon. Friend the Member for Solihull (Lorely Burt) rightly emphasised the benefits of open markets and highlighted the dangers that going down a protectionist route might have. The hon. Member for Birmingham, Erdington (Jack Dromey) talked about how the Government could use their £100 billion public procurement programme to underpin economic recovery. Of course we will consider that as part of our growth review. My hon. Friend the Member for Crewe and Nantwich (Mr Timpson) was concerned about the amount spent on consultancy. The bulk of that happened under the previous Government, but I agree that we need a more efficient approach to spending on consultancy in relation to procurement in the future. Since the general election the consultancy spend has been considerably reduced.
It is important to recognise that Bombardier, alongside other train manufacturers and train and component supply chain businesses in the UK, will have the opportunity to bid for a range of contracts in the future. We are reforming the franchise system to incentivise train operators to invest in new rolling stock. We have given the go-ahead for the tube upgrades. We have secured funding for Crossrail. We are going ahead with a consultation on high-speed rail. Bombardier is a highly successful global company, with a proven record of winning big contracts for its Derby works and elsewhere. It has done so in the past; we see no reason why it should not be well placed to do so again in the future. In recent years it secured orders for nearly 1,400 carriages for London Underground’s sub-surface line, 376 for the Victoria line and 232 for London Overground. It has been shortlisted for the Crossrail order. Its striking success rate on tube-related contracts must put it in a strong position for when London Underground next needs to procure new carriages, which, thanks to the securing of funding for the tube upgrade, will happen in due course. Only a few weeks ago, Bombardier won a £354 million signalling contract for London Underground.
For all those contracts we are determined to ensure that domestic suppliers are treated entirely impartially and given a fair chance of getting them. The fact that the coalition Government have secured funding for such a major programme of capacity enhancement will result in major opportunities, not just for Bombardier but for other train component and supply chain manufacturing businesses in this country. Following its nomination, for example, as the preferred bidder for the intercity express programme contract, Hitachi has announced that it is locating its train manufacturing services for Europe at Newton Aycliffe in County Durham. That will provide significant opportunities for UK component manufacturing. As has been said, if the Siemens Thameslink bid proceeds to conclusion, it will involve the creation of 2,000 jobs in the UK. It has indicated that it intends to use elements of the UK supply chain to supply its bid.
This has been a difficult debate, and it is a difficult time for Derby. We are determined to help.
Chris Williamson
Will the Minister at least give an undertaking to take legal advice on the possibility of calling in the decision and reviewing it, with the possibility of reversing it, as has happened with previous contracts?
Mrs Villiers
We have looked extensively at the contract and have done the numbers very carefully. As I have said, it is not legally possible for us to rip it up. We need to ensure that in future, Bombardier and all our domestic suppliers will be well placed to compete effectively for bids and competitions that will be made possible by the coalition’s commitment to investing in our railways.