BAE Systems

Lord Wharton of Yarm Excerpts

Thursday 24th November 2011 Commons Chamber

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

It is a pleasure to follow the right hon. Member for Haltemprice and Howden (Mr Davis). As he said, for the past 14 years we have worked together to try to protect the interests of BAE workers at Brough. We have been joined in that by other Members who represent constituencies in Hull and the east riding, many of whom are here today, but he and I have been working together on it the longest.

Three consistent themes have run through all our discussions with BAE and its work force. First, there is a superb work force at Brough, as BAE has stated over and over again. Indeed, Allan Cook, who heads the Government’s talent retention unit and has a long history in the aerospace industry, having worked for Marconi, Cobham, BAE and Marshalls, told us a few days ago that he had never encountered such a talented group of workers in his entire engineering career. Secondly, there is the success of the Hawk. Since its first flight in 1976, 900 Hawk aircraft have been sold around the world. It is an iconic British product that is still in great demand, as I will show later. Thirdly, the work force have shown remarkable loyalty to, and respect for, the company. On the several occasions when the plant has been downsized, I have found the work force’s enormous respect for the company incredible.

Since the announcement on 27 September, only one of those three consistent themes has changed; I am afraid that the company has lost the respect of its work force. One long-serving employee who wrote to me—I am sure that colleagues have received similar letters—said, “Until this week I was proud to wear BAE Systems’ name but now find myself appalled by the actions of the senior management.” That kind of sentiment has been repeated by people who feel utterly betrayed by the announcement and by the way it was made.

BAE is seeking to end 100 years of aerospace manufacturing on the Humber not because of any problems with the staff or the product they produce, but because in difficult times it would rather impress shareholders with how tough it can be than impress the work force with how honourable it can be. The decision of the four Typhoon countries to slow deliveries of the aircraft was of course a blow, but the European Aeronautic Defence and Space Company and Finmeccanica are slowing production of the Typhoon in Germany, Spain and Italy without losing any highly skilled manufacturing jobs.

[James Wharton (Stockton South) (Con)]

The right hon. Gentleman makes the important point that this might appear to be a short-term decision that benefits shareholders in the immediate future, but does he agree that in the long term shareholders would probably rather see the retention of an important skills base that will allow BAE to compete effectively in future and secure contracts?

[Alan Johnson]

That is absolutely right. That is why we wanted a debate in the House with a motion setting that out, because that is precisely the message we need to put out. As I will say later, that is precisely what other serious manufacturing companies are doing.

Four countries are affected by the decision to slow delivery of the Typhoon, but only BAE in the UK has reacted by throwing highly skilled engineers out of work and abolishing a manufacturing plant. Although the company says that its announcement was forced by the slow-down in orders for the Typhoon, almost a third of the job losses are for the Hawk, an aircraft that remains popular around the world. Orders are imminent from Saudi Arabia, Oman, Iraq and the United States, and potential orders are imminent from Poland, Kuwait and the RAF in a few years’ time. When we and others, including the unions, have asked the company what will happen if they get an order for 10, 50,100 or 150 Hawks next week—this relates closely to the point that the right hon. Member for Haltemprice and Howden made about the 90-day process—its reaction has been that nothing would change. Our suspicion is that is because there is a view that it will not be the other side of the Pennines that benefits from extra Hawk orders, but Texas, India and manufacturing plants abroad.

When the unions have berated BAE on the effects on British manufacturing and pointed out that it is an important British manufacturing company, it has replied that it is not a manufacturing company, but an engineering company that chooses to manufacture, the implication being that that is the choice it has made at the moment but might not make in future. In no other major industrialised country in Europe would a company that has spent much of the past decade moaning about skills shortages be getting rid of some of the most highly skilled people in the country. In no other major industrialised country would a company whose biggest customer is the Government and whose biggest investor historically has been the taxpayer be causing such damage to a precious sector of the economy.

There is an alternative approach. Andrew Witty, the chief executive of GlaxoSmithKline, another British manufacturer that sells its products abroad, lambasts British businesses that turn themselves into “mid-Atlantic floating entities” with no connection to society. He says that his company has given a lot to Britain, but that Britain has given a lot to his company and that it would not exist without the work of British people and the support of the British Government. He is busy returning manufacturing jobs from abroad to this country. He says that his objective is to give more jobs, provide more skills and pay more taxes in Britain. It is a shame that other iconic international British companies do not follow the same philosophy.

--- Later in debate ---

[James Wharton (Stockton South) (Con)]

I congratulate hon. Members of all parties on what has been a passionate and heartfelt debate on behalf of constituents right across the country. It is always reassuring when there is a consensus across the political divide on an issue of such importance.

I shall speak primarily about one facet of this decision—the policy that successive Governments of whatever colour have taken towards defence procurement and how it should be considered by BAE as it moves forward. In broad terms, there are two camps on defence procurement. There are those who believe—we have heard some of their arguments put forward eloquently today—in the strategic imperative of retaining our defence industrial production base: our capability, as a nation, of building our own defence and aerospace systems. At one extreme, that could mean everything from building the wings and canopy on a fighter jet to supplying the bullets that go in SA80 A2. That is a valid argument that retains an integrity and strategic independence for the UK, which has been valued highly by Governments for many years.

At the other end of the spectrum—the other argument put forward by the likes of Lewis Page in his book, “Lions, Donkeys and Dinosaurs”—is the suggestion and proposal that we should buy off the shelf and look to find the most effective but also cheapest option that meets our defence requirements and needs. We should not falsely subsidise an industry, as some argue, for strategic reasons when so many other countries across the world supply their defence needs by off-the-shelf methods because they do not have that home-grown capability.

The reality for BAE is that it is a company that is a product of political decisions taken over many years. It is a product of decisions taken by the British Government to retain the defence infrastructure and capability for a variety of strategic and economic reasons, including the benefits that flow from that in jobs, development, R and D, new technologies and exports. In 2009, BAE exported about £4.9 billion-worth of equipment, expertise and knowledge from the UK. That is very valuable for our economy and helpful to the Exchequer.

BAE is a product of a series of policies. This debate sends an important message to the company. If by the decisions it takes it loses the skills base that allows it to be competitive, and if it stops delivering, or reduces, the jobs benefits and economic advantages to this country, there is a danger that those who propose a more purist free-market approach to defence procurement will feel that their argument is strengthened. BAE’s great strength is that it has provided British jobs, growth, investment, technology and research. If it loses skilled workers and finds itself having to re-recruit when future contracts are secured, thereby driving up its costs and driving down its competitiveness as well as damaging our skills base nationally, it will weaken its future prospects and strengthen the argument of those who believe that we should be looking to buy more off the shelf and to rely on others to do the heavy lifting of developing defence technologies, all of which are expensive. Although at heart I am a free marketeer, I am extremely concerned that BAE might take a decision that benefits its short-term profit margin but in the long term could damage its capabilities, strategic position and ability to compete successfully for British contracts.

I am concerned that the arguments of those who do not believe in, or support, our home-grown defence production infrastructure will be made stronger by what appears to be a short-term decision that will benefit neither the company nor this country. I therefore urge BAE to listen to what Members have said today, and to look at the options available to it. I ask it to reconsider its decision at this time of great economic need for the United Kingdom, and to come to a different decision that would be better for its long-term future and that of its work force.