BAE Systems

Diana Johnson Excerpts

Thursday 24th November 2011 Commons Chamber

[Peter Luff]

The whole future of the unmanned combat sector is important for the Government and lies at the heart of the strategic future of aerospace and defence aerospace. We will be considering the matter extremely carefully later in close dialogue with the companies involved. The hon. Gentleman makes an important point. It is vital that the programme succeeds. The matter is complex as it plays into the UK-French bilateral relationship, but we are determined to take it forward in the best interests of UK industry and, crucially, the defence industry.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I listened with interest to that last point about how important the sector could be to the future of the defence industry. As an MP representing a constituency in Hull, may I ask the Minister whether he has had any direct conversations with BAE Systems about how that type of work could help to deal with the issues identified at Brough regarding future work?

[Peter Luff]

The short answer to that question is yes. I have obviously discussed the future of the sector with the company, but I have not done so in specific detail about Brough—in general terms, yes, but not specifically about Brough. If the hon. Lady wishes to make a suggestion to me, I will happily take it forward.

The Government need an efficient defence industry, and I make no apology for saying that. Another line in the letter to hon. Members seems to suggest that we are in some sense to blame for wanting BAE Systems to be more efficient. We want it to be more efficient for the sake of taxpayers and also for the sake of export opportunities. I make no apology for demanding that efficiency of our suppliers.

Although using open competition on the global market is the MOD’s preferred option and its default position for purchasing defence capabilities—I listened carefully to what my right hon. Friend the Member for Haltemprice and Howden said in that respect—in certain situations, the MOD has had to enter into single-source procurement for some of the capabilities we must have in the UK. In these situations, we use the yellow book—it is called that because it is yellow—or “Government Profit Formula and Associated Arrangements” to give its full title. The yellow book covers the pricing arrangements to be used in single-source, non-competitive procurement. That can include reasonable rationalisation and redundancy costs, provided they are associated with a reduction in work related to single-source procurement.

The yellow book arrangements have remained largely unchanged for more than 40 years, which is why in January this year I commissioned Lord Currie of Marylebone to undertake a root-and-branch independent review of it. The MOD is currently undertaking a consultation, which runs until the new year, on Lord Currie’s proposals. No decisions will be made on his proposals until the consultation has been completed.

--- Later in debate ---

[Diana Johnson (Kingston upon Hull North) (Lab)]

I, too, pay tribute to the work of the right hon. Member for Haltemprice and Howden (Mr Davis) and my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), who have championed the issue of BAE Systems for a very long time in the Humber area. I pay tribute also to all the Humber MPs who have been involved since the announcement in September about what will happen in Brough, and who have been fighting quite an effective campaign. I pay tribute to the trade unions at Brough, which provide an excellent example of a modern trade union movement that is fighting its corner very hard indeed.

In an exchange that I had with the Minister on 14 November, I asked him what he was doing to support the people at Brough who had been told that their jobs were in jeopardy. Unfortunately, he gave me a response with which I was not very happy, basically saying that it was a matter for a private company, that it was up to the company to decide whether there would be redundancies and that it was not really anything to do with him. I noticed that today, he talked about his deep regret about BAE Systems’ announcement of the redundancies at Brough, but I say to him that it is not a factory making widgets. It is a defence manufacturer that is strategically important to this country, and in an area that is suffering disproportionately in the economic downturn.

It is unusual to debate a specific company on the Floor of the House—debates are not normally about one company. There are three issues, the first of which is BAE Systems in the context of the Humber area. I am the MP for the constituency that has the dubious characteristic of having the most people on jobseeker’s allowance seeking a position—58.9 people are after every vacancy in my constituency. Any job lost in the area is a real problem for local people. The work force in Brough are highly skilled and motivated. If they lose their jobs, and if they can get other jobs locally, it is likely that they will be paid less and will not enjoy the conditions that they have enjoyed in previous years. Brough is an excellent example of manufacturing, and it would be a loss to the Humber region if it goes.

I noted what the right hon. Member for Haltemprice and Howden said about the salary of Ian King, which is more than £2.5 million this year. We should compare that with the average salary in my constituency: 40% of people in my constituency are on less than £14,000, which puts into context the importance of those jobs to Hull and the Humber region.

I hope that in the forthcoming White Paper, the Minister mentions not only the need to look at how we procure equipment, but the importance of maintaining manufacturing in the UK to its strategic capability.

Will the Minister undertake to press BAE on the following matters? First, why will the company not consider taking up the interim proposal of the unions and the executives to phase the movement of Hawk production to Warton over the next four years? That would protect an additional 300 jobs at Brough and save the company £22 million in production costs on the current contract. Secondly, how will the company manage the significant risk involved in moving production to Warton? The risk should not be underestimated—the move seriously compromises BAE’s ability to tender for aircraft contracts in future. Thirdly, will the Minister press BAE on why it will not consider allocating some of its significant naval works to the Brough site?

The Humber area is suffering with the economic downturn. My hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) mentioned the flatlining economy, but the economy is particularly bad in the Humber area—the region is suffering more than others in the country. The Minister and the Government need to consider very hard what else they can do through the Department for Business, Innovation and Skills to ensure that alternative work is brought to the Brough site.

If BAE Systems goes ahead with its decision and makes people redundant, what legacy will it leave for the community, which has served it very well for many years? People have worked there for 20 or 30 years, and whole families work there. What will BAE Systems do? What will it leave behind for that community, which will suffer if the decision to make people redundant goes ahead?