Magnox: Early Contract Terminations

Debate between Rebecca Long Bailey and Greg Clark

Monday 27th March 2017 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on the Nuclear Decommissioning Authority’s early contract terminations at the Magnox estate?

[The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)]

This morning, I informed the House that the NDA has terminated its contract with the Cavendish Fluor Partnership for the decommissioning of 12 redundant Magnox sites. The NDA ran a £6.1 billion tender process from April 2012, which resulted in a 14-year contract being awarded in September 2014 to the partnership, which is a joint venture between the British firm, Cavendish Nuclear, and Fluor Inc.

CFP started work on the estate on 1 September 2014 and there then started a consolidation process to ensure that the scope of the 2012 tender matched the actual status of decommissioning. It became clear to the NDA that there is a significant mismatch between the work that was tendered for and the actual scale of the work that is required to be carried out. The NDA board concluded that it should terminate the contract on two years’ notice. Termination is made with the agreement of CFP and is no reflection whatsoever on its performance.

Dealing safely with the UK’s nuclear legacy is fundamental and non-negotiable. Decommissioning work will continue under CFP for a further two and a half years. The NDA will establish arrangements for a replacement contracting structure to be put in place for when the current contract ends. The NDA has also settled outstanding claims against it by Energy Solutions and Bechtel in relation to the 2014 Magnox contract. The NDA was found by the High Court to have wrongly decided the outcome of the procurement process. It is clear that the 2012 tender process was deeply flawed. The NDA has agreed settlement payments with Energy Solutions of £76.5 million, plus £8.5 million of costs, and with Bechtel of $14.8 million, plus costs of about £462,000—approximately £12.5 million in total.

Those are very substantial costs, which could have risen further if the case had proceeded. Taxpayers must be able to be confident that public bodies are operating effectively and securing value for money. Where that has not been achieved, such bodies should be subject to rigorous scrutiny. I have therefore established an independent inquiry into the original procurement process and why the 2014 contract proved unsustainable. Those are separate issues, but they need to be examined thoroughly. I have asked Mr Steve Holliday, the former chief executive of National Grid plc, to lead this inquiry. It will take a cradle-to-grave approach, beginning with the NDA’s procurement and ending with the contract termination. The inquiry will set out the lessons learned and recommend any further actions it sees fit, including any disciplinary investigations or proceedings that may be appropriate. The inquiry will report jointly to me and to the Cabinet Secretary, and his report will be available to this House and to the Select Committee.

This was a defective procurement with significant financial consequences, and I am determined that the lessons to be learned should be exposed and understood; that those responsible should be properly held to account; and that this should never happen again.

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[Rebecca Long Bailey]

The NDA has withdrawn its appeal against the judgment that was handed down in late July last year, so will the Secretary of State explain why this decision has been taken now, why the matter was brought to appeal in the first instance, and whether both actions were sanctioned by him or his predecessor?

The judgment confirmed that the NDA had not acted properly in the tender process, and that it was

“acutely aware that an unsuccessful bidder might challenge the outcome of the competition.”

The court stated that the NDA had fudged the evaluation to achieve a particular outcome. More worryingly, the judge also confirmed that the NDA attempted to get rid of information that might have been detrimental to its case, and there was reference to the shredding of notes. Given the serious nature of the judgment, will the Secretary of State assure the House that there will be full public disclosure of the investigations, and a public hearing? Does he agree that this case has called into question the future operation of the NDA? Will he explain what structural changes are necessary, and when? Can he offer any assurances to Magnox workers?

Finally, the Secretary of State’s written statement confirms:

“It has become clear to the NDA…that there is a significant mismatch between the work that was specified in the contract as tendered in 2012”.

Will he tell the House when he or his predecessor was first aware of that mismatch and whether it would have been apparent from the work that had already been carried out by previous contractors?

[Greg Clark]

The hon. Lady is quite right to ask her questions, and I hope she will agree that the written ministerial statement I have made today is thorough and comprehensive. I am very happy to have conversations with her and the Select Committee over the weeks and months ahead.

The hon. Lady asked some specific questions about the termination of the contract and the litigation. On the latter, there was indeed a Court hearing and judgment in July last year, and there was another one in December on which the NDA has reflected. On 1 March this year—a few weeks ago—a new chief executive and chair of the NDA took office. It seemed to me appropriate that a new set of eyes should consider these matters and the course of action, rather than those people who were responsible for and involved in the procurement exercise looking into it. In answer to the hon. Lady’s question, it was a decision for the NDA board—that is how it is constitutionally established—but its decision required ratification by me, the Chief Secretary to the Treasury and the accounting officer in my Department.

The hon. Lady asked some very important questions about the conduct of the original procurement process and its management. That is exactly why we need to have an independent figure—independent of Government and of the NDA—to make a report available to the House, to me and to the Cabinet Secretary, not only so that we can learn the lessons and ensure that things cannot happen again, but so that, if there is fault and an error has been made, the recommendation of disciplinary action can follow.

The hon. Lady rightly asked about the Magnox workforce, for whom this will be a difficult day. I am happy to confirm to the House that there is no question about the operational good performance of the contract; it was a question of the terms of the letting of the contract. Good progress has been made, and the workforce employed on the decommissioning contract will continue as planned. When the report is made available, lessons will be learned about the NDA’s structure, as well as any particular procedural aspects.

Oral Answers to Questions

Debate between Rebecca Long Bailey and Greg Clark

Tuesday 14th March 2017 Commons Chamber

[Greg Clark]

My hon. Friend is absolutely right. This is an important sector, as has been evident from our discussions this morning. That reflects the track record of working together that will continue and be reinforced. I think that all Members across the House will have been as delighted as I was that Boeing made its commitment to its first ever UK plant in Sheffield, showing how attractive we are to advanced manufacturing businesses such as that.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

The BEIS Committee’s recent report stated that the industrial strategy Green Paper

“provides little clarity on how…sectoral deals will work in practice”,

and that it appears to lack “political will”, falling short of

“providing a clear framework for decision making in the long term.”

Is it lack of clarity or lack of political will that has led to a bespoke Brexit deal for certain manufacturers while leaving others, and indeed other industries, in a state of uncertainty?

[Greg Clark]

May I welcome the hon. Lady to her first BEIS oral questions? I see her predecessor behind her. She is, I think, my third opposite number in the eight months that I have had this job. The first was appointed in the summer, the second in the autumn, and she was appointed in the winter. I noticed this week that the birds were singing and the sun was out, so I hope that is not bad news for the hon. Lady. On her points about the industrial strategy, the sector deals that we have proposed have been widely welcomed. We have set out a number of initial deals in, for example, life sciences and the creative industries. We are already talking to other sectors such as the steel sector, and a lot of colleagues in the House will want to see that taken forward.

[Rebecca Long Bailey]

Oh, the Secretary of State is cheeky! He might want to refer to the report, because it also states that the White Paper on exiting the EU failed to meaningfully refer to an industrial strategy

“and reinforces a lack of coordination between the Government’s major challenge and its principal plank of business policy.”

Given that last week’s Budget failed to mention Brexit or the industrial strategy, does the Secretary of State agree with the recent Foreign Affairs Committee report that the Government have provided “no evidence” of industrial contingency planning in the event of no deal? If that is so, what is his no deal plan?

[Greg Clark]

I say gently to the hon. Lady that she will have to do a bit better than that. I have the Budget here. She says that it does not mention the industrial strategy. I can tell her that it is mentioned in the first paragraph on the first page, and throughout. Given her interest in this, she ought to read the Budget.

Opel/Vauxhall: Sale to PSA Group

Debate between Rebecca Long Bailey and Greg Clark

Monday 6th March 2017 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on the sale of Opel/Vauxhall to PSA Group.

[The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)]

This morning the boards of General Motors and PSA Group announced plans for PSA to acquire GM’s Vauxhall/Opel operations. The proposed deal is expected to be completed by the end of this year.

The Prime Minister and I have been engaged in discussions with both GM and PSA, and with the French and German Governments, to ensure that the terms of the agreement can give confidence to Vauxhall’s UK workforce now and for the future. Vauxhall is an iconic, important and successful British car manufacturer. Vauxhall cars have been made in Britain for 113 years, and we are determined that that should continue to be the case for many years to come.

The car plants at Ellesmere Port and Luton have a proud record of being among the most efficient in Europe, with workforces that are skilled, committed and flexible. Both PSA and GM have confirmed to the Prime Minister and me a number of important commitments, including that the company will honour its agreements with the Vauxhall workforce; that Vauxhall pensioners will be in at least as good a position as they are today; that the treatment of the UK division will be equal to that of other countries in the Vauxhall/Opel group; that the identity of Vauxhall will continue to be distinct and prominent; that the strategy of the new company will be one of building on existing strengths and commitments, not on plant closures, taking opportunities to increase sales around the world; and that the company will work with me and the rest of the automotive sector to ensure that it can participate in a substantial programme of research and investment for innovation in areas such as electric vehicles and battery technology, which is part of our industrial strategy.

This morning I had a further conversation with my French counterpart the industry Minister, and my hon. Friend the Minister for Climate Change and Industry spoke again to his German counterpart to agree a consistent approach. I speak frequently with Len McCluskey, the general secretary of the largest trade union at Vauxhall, and I have kept, and will keep, colleagues with particular constituency interests up to date at all times.

It is in everyone’s interests that Vauxhall should look forward to a successful future. A generation ago, the British car industry epitomised our economic woes; today that industry is a beacon of success. Companies invest in Britain because our automotive sector has a high-quality workforce and world-class efficiency, and is part of one of the most exciting places on earth for innovation and research in new technology. The future of the motor industry is bright in Britain, and we will be active at all times in doing everything that we can to make it brighter still.

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[Rebecca Long Bailey]

I thank the Secretary of State for that positive response, but I would like further clarification on a number of issues.

First, although I welcome PSA’s promise to honour existing contracts, I am deeply concerned about the 40,000 workers who are currently employed at Luton and Ellesmere Port and in the wider supply chain, who will be worried about the future of their jobs. What assurances has the Secretary of State personally received about the future of Vauxhall’s plants and the wider UK workforce beyond existing contracts? During his discussions with PSA, did it confirm that the production of the new Astra model would take place in the UK?

Secondly, there has been some discussion about the £1 billion deficit in General Motors’ UK pension scheme, with some commentators stating that it could have jeopardised the deal. The scheme has 15,000 members and is one of the largest in the UK. Can the Secretary of State assure the House that the pensions of the UK workforce are guaranteed in full?

Thirdly, it is increasingly clear that the Government have little power to ensure that certain corporate takeovers are in the public interest and accord with Britain’s industrial strategy. Existing legislation allows intervention only when matters relate to national security or media concentration. Does the Secretary of State have any plans to broaden the definition of public interest, for example to serve stakeholders and not just shareholders? If so, when will he publish the draft legislation?

Finally, what support has been offered to PSA following Britain’s exit from the European Union? We welcomed Nissan’s decision to remain in the UK as a result of assurances provided by this Government. Has PSA been offered the same deal? If so, would it not make sense for the Government to set out their strategy for this sector as a whole, rather than enlightening businesses one crisis at a time?

[Greg Clark]

I am grateful to the hon. Lady for her questions. The last two weeks have been worrying times for the workforce. The statements that have been made by both parties today have been welcomed—not just by me, but by the trade unions—as steps in the right direction. It is important that we should hold the company to account on that.

On the points that the hon. Lady mentioned, PSA has said that it will honour GM’s agreements with the unions, which extend to at least 2021. In the motor industry, as she will know, new models come in at various points. We are fortunate that both the principal models in the UK are at quite an early stage in the cycle. I want, as I am sure she does, both plants to be competitive in expanding their production in the years to come.

I have discussed pensions regularly and in detail with GM and PSA. They have given an absolute commitment that no pensioner—current or prospective—will be worse off in any way. Of course, the Pensions Regulator, which is independent of the Government, is required to confirm any changes in pension arrangements.

In terms of the takeover regime generally, the hon. Lady will know that, in this case, one overseas-owned company is being taken over by another; we are not talking about a listed UK company that falls within the UK merger regime. In discussions with my counterparts in France and Germany, I have agreed that we should take a consistent approach on the assurances that are needed. The trade unions are equally in contact with their opposite numbers in other countries.

In terms of the support available to the automotive sector, as I mentioned to colleagues a few moments ago, that sector has been a great success in this country. One of the foundations of that success is the co-operation that we have had—Government to sector, and within the sector through the Automotive Council—to invest in research and development, particularly for electric vehicles and battery storage, and to make sure that we have institutions to train the future workforce. That has been a great success, and I hope that the future owners of Vauxhall will participate in the same way as other successful UK motor industry players have done.

Vauxhall/Opel: Proposed Takeover

Debate between Rebecca Long Bailey and Greg Clark

Monday 20th February 2017 Commons Chamber

[Greg Clark]

Of course, the continued welfare of the pensioners is of great importance in any prospective takeover, and I have mentioned in my discussions with GM and with PSA how important it will be. No deal has been concluded yet, but both those organisations are well aware of the importance that I, and my hon. Friend the Member for South West Bedfordshire (Andrew Selous), attach to that matter.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I thank the Secretary of State for his response and my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) for his question. Vauxhall employs over 40,000 people in the UK, as the Secretary of State said, including 4,500 at its manufacturing plants in Ellesmere Port and Luton and tens of thousands in its retail and support arms and in the supply chain. It is, as we have heard, a great British success story.

I would like to raise a number of questions. First, the French Government own a 14% share in Peugeot, which has prompted many to suggest that any job cuts are likely to fall on Opel’s six plants in Germany, the UK and Spain. The German Government have already demanded that there must be no job or plant losses as a result of any deal, and German papers reported yesterday that PSA had pledged to continue operating all four of Opel’s German production sites. Will the Secretary of State tell us what action the Government are taking to obtain the same assurances for the UK? Will the Prime Minster demand that no jobs or plants will be lost when she meets the PSA chief executive?

Secondly, at the 2016 Conservative party conference, the Prime Minister stated:

“We are the party of workers”.

To make good that promise, will the Secretary of State confirm that he will demand equal treatment for UK workers, compared with workers in France and Germany, in any final deal package?

Thirdly, the UK’s automotive industry is dependent on the EU for sales and components. Nissan’s special deal provided assurances of unencumbered EU market access, more UK-based suppliers, and support for green vehicle research and development and for jobs and training. Can the Secretary of State confirm reports that PSA has been offered the same deal, and whether, in return, it has given an assurance that no UK jobs or plants will be lost? Is it not the case that all UK industries require certainty and stability? Would he agree that a haphazard and crisis-led approach is quite simply the very antithesis of an industrial strategy?

[Greg Clark]

First, I welcome the hon. Lady to the Dispatch Box and congratulate her on her appointment. She will find that there is no one more prepared than I am to be active in supporting employment prospects in every constituency in the country, wherever they might be. In our discussions with industry, including the automotive industry, about overseas investment, there has been tremendous enthusiasm and warm encouragement for our industrial strategy. This is something that has been pursued in other countries for some time. I think the hon. Lady described our approach as haphazard and random—

[Rebecca Long Bailey]

Haphazard and crisis-led.

[Greg Clark]

Indeed. I am not sure that the hon. Lady, in speaking from her Front Bench, is in the best position to talk about that. She made some important points, however. She mentioned the fact that the French Government own a significant stake in PSA. That is why I felt it was important immediately to have a meeting with my French counterpart. That meeting was very constructive, and he recognised the importance of ensuring that the whole of Europe should be treated fairly in these discussions. We agreed to stay in close touch on that, and I was grateful to him for seeing me.

On the treatment of plants across Europe, one of the points that the PSA executives made to me is that, since the new management of PSA has been in place, they have taken pride in the fact that part of their strategy is not to close plants. The discussions are clearly continuing and no deal has been done, but I share the view of the hon. Lady, the hon. Member for Ellesmere Port and Neston (Justin Madders) and Members on both sides of the House: it is very important that our successful enterprises with successful workforces should be able to continue that success in the future.

As for questions about the European Union, many of GM’s operations in Europe are in Germany, which is not about to leave the European Union, so this is not a Brexit-related transaction. I have said very clearly that our commitment, evidenced in black and white in our industrial strategy, is to build on our strengths in advanced manufacturing, including in the automotive sector. That is available to all players in the sector through the Automotive Council, and in our industrial strategy we mention electric vehicles, battery storage and training, which are important to all members of the sector and, as I began by saying, have attracted enthusiastic support from firms all over the world.