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BAE Systems (Lancashire)

Volume 534: debated on Thursday 27 October 2011

Motion made, and Question proposed, That this House do now adjourn.—(Angela Watkinson.)

BAE Systems recently announced 1,423 job losses in Lancashire, including 822 at the Warton site in the constituency of the hon. Member for Fylde (Mark Menzies), 565 at the Samlesbury site in your Chorley constituency, Mr Deputy Speaker, and a further 136 elsewhere in Lancashire. Many of the highly skilled workers who will find themselves out of work live in Preston and the surrounding area of central Lancashire.

The chief executive of Preston city council, Lorraine Norris, has written to the Secretary of State for Business, Innovation and Skills, the right hon. Friend of the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), who is here to reply to this debate, and in a fairly detailed letter that makes its points quite strongly, Ms Norris, with the support the Labour administration in Preston, says:

“Lancashire provides the greatest number of direct and indirect aerospace jobs in the country and while individuals affected by BAE redundancies may be able to find work elsewhere by moving to other parts of the country, their skills will be lost to the local economy and the Lancashire economy weakened. Because of their long lead in time, skilled jobs lost in this way cannot easily be replaced when the country’s economic fortunes improve.”

She goes on to say:

“Preston has been successful in moving away from an economy dominated by low-value manufacturing linked to the textile industry”—

like Yorkshire—

“and broadening its economic base. We have been able to retain and expand high value manufacturing jobs linked to advanced engineering, with strengths in both the aerospace and nuclear sectors. With our partners we have been working hard to improve links between industry and the Higher Education sector—particularly with the Universities of Manchester and Central Lancashire… As a result in the decade up to 2008 we have been able to demonstrate the third highest increase in private sector jobs in the country.”

The Government talk about rebalancing the economy. Nobody and no area has done more to rebalance it than Preston and central Lancashire, given that many civil service and public service jobs were located there, and that of course it has a large private sector.

Unemployment is at a 17-year high. In Preston it stands at 5.2%, compared with 3.9% nationally, and almost 5,000 people are seeking employment, which is the highest level since jobseeker’s allowance was introduced. BAE Systems employs about 40,000 people in the UK, down from 42,000 in 2009. Many of those jobs are based in the north-west, and given the work’s technical nature the majority of workers are highly skilled.

Let me give the Minister some facts and figures. In Preston and Fylde, one in four residents working in manufacturing works at BAE Systems, principally at the Warton and Samlesbury sites. Between 2008 and 2010, Preston lost 4,800, or 5.1%, employee jobs, against a fall of 2.4% in the 12 districts of Lancashire and a drop of 3.4% nationally. That is a tragedy. The success of the company is therefore vital to the regional and national economies. BAE makes a direct contribution to them, and many other jobs in Lancashire are dependent on BAE. It has been independently estimated that each aerospace job creates four or five related jobs in the supply chain. There is therefore a multiplier effect on unemployment and the economic picture is far worse than the headline figure suggests.

The announcement of more than 1,400 job losses is a devastating blow, first and foremost for the workers and their families, but also for the local economy and Britain’s wider manufacturing and defence industries. As cuts are made and contracts go overseas, a highly skilled work force are being lost. I wrote to the Secretary of State for Business, Innovation and Skills some weeks ago to ask what steps the Government are taking to limit the impact of the job losses, but I am sorry to say that, despite the urgency, I have yet to receive a reply.

I asked the Department for Business, Innovation and Skills about an employment impact assessment, but have yet to receive a credible reply. It seems that no such an assessment has been made. Does my hon. Friend agree that it appears that employment is considered to be a price worth paying? EADS and the Italian workshare contractors are making no one unemployed—that was reported in the Financial Times on 3 October—but the Government seem to think that it does not matter if 3,000 people are made unemployed.

I agree. Although the enterprise zones are a welcome addition to Lancashire, they are a sticking plaster to try to cover the running sore that the job losses have become in Lancashire. The announcement of 1,400 job losses is a devastating blow.

A key area of development at the Warton and Samlesbury sites is the manufacture of the Eurofighter Typhoon jet. It recently flew its first major combat mission, serving in the skies over Libya to help the national transitional council in its war against Gaddafi, which is testament to the need for the aircraft. The production work is taking place in three tranches. Tranches 1 and 2, involving the production of 384 Typhoons, are now complete, and include 144 jets ordered by the previous Labour Government, with the remainder going to our European partners. The Labour Government also signed up to tranche 3A, which is the subject of the current defence cuts. The coalition Government are now planning to halve the UK’s tranche 3 order. BAE will cut its production from 61 to 36 jets annually, resulting in thousands of job losses. How can the Government justify massive cuts to our defence industry when the economy is edging towards recession? These cuts go too far, too fast and are resulting in the slowdown in production of the Typhoon aircraft.

I congratulate my hon. Friend on securing this debate. Is he aware that the disappointment and support for those workers is shared throughout the north-west, not least because of the synergies in the defence industry in that region? Is he also aware that Barrow shipyard is an example of how the submarine supply chain could be damaged as companies that supply the Typhoons lose orders and their workers are put under threat?

I am well aware of the synergies, the skills that are employed in the submarine and shipbuilding industries and the implications for aircraft carriers. They are connected, and everyone who works in the defence industry throughout the country is worried.

If the Government made more finance available, BAE could ramp down production of Typhoons more gradually, instead of the step-down transition. That would enable the company to mitigate the impact of job losses by steadily reducing its work force as workers now in their early 50s approach retirement. That would coincide with the conclusion of tranche 3A production in 2015. The unions at BAE are in favour of that approach—a gradual ramping down while meeting the country’s defence needs, instead of a drop from 61 aircraft to 36 a year from January next year—but that is not happening. As in so many other areas, the Government’s strategic defence review was rushed and ill thought through. Labour Members recognise that some savings must be made, but they should be part of a carefully constructed industrial strategy, not a rushed and ideologically driven SDSR.

The decision to cut production has wreaked havoc with BAE’s medium-term and long-term plans and produced a great deal of uncertainty. A highly skilled work force will be lost forever. Thousands of years of accumulated experience and skills will be thrown aside, and although orders may arrive in future from India or, possibly, Japan, the loss of these workers will be tragic. Many will go to work in other parts of the country and take up new positions; many will take early retirement and be lost to the industry for ever.

Simply put, this Conservative-led Government do not understand the consequences that their policies have on workers, on businesses or on the manufacturing economy as a whole. Typhoon could be made more competitive and attractive for export by improvements to its radar capabilities. Will the Government fund the development of the E-Scan radar system? If so, will the Minister update the House on whether funding has been allocated for that development and whether the finance has been sent to SELEX or to BAE Systems? I invite the Minister to intervene to deal with that point.

As the hon. Gentleman knows, the assessment is under way between the Government and industry, and it would be a mistake to pre-judge its outcome. We are funding and engaged in that assessment programme and we are hopeful that it will be advantageous. It is important to bear in mind that this will be at the forefront of European technology; it is an important long-term investment.

I am not sure whether that was a yes or a no on whether the funding was made available. When trade unions met the Under-Secretary of State for Defence, the hon. Member for Aldershot (Mr Howarth), at the Conservative party conference—the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford, was also present at the meeting, but arrived late—they were assured that the money had been allocated for E-Scan radar, but Ian King from BAE Systems has said that no money has been allocated or transferred to the company, and SELEX says the same, despite the fact that the Defence Minister gave assurances that that money was going to the E-Scan programme.

It is imperative that the Government provide a coherent plan of action to help Britain’s defence industry and the wider manufacturing sector as a whole. The longer BAE is able to keep workers, the better prepared it will be to meet demand should other countries order Typhoon jets. Will the Minister tell the House what steps his Government are taking, not only at ministerial level but through UK Trade & Investment, to secure defence contracts from India and Japan, both of which have been linked to the Typhoon project?

In his first major speech after the general election, the Prime Minister pledged to make the next decade

“the most entrepreneurial and dynamic in our history”

and said that he wanted to

“give manufacturing another chance in this country.”

Speaking of his desire to rebalance the economy, he said that Britain had become

“heavily reliant on just a few industries and in just a few regions—particularly London and the South East.”

The actions of his Government in the past year have demonstrated that those were empty words.

BAE is a world-leading manufacturer that contributed £4.9 billion to UK exports in 2009—about 2.1% of Britain’s total goods. Half its UK employees are based in the north, and it is being forced to cut jobs. The manufacturing industry base of this country is in crisis and the Government have no clear plan of action—indeed, by squeezing the life out of the economy, they are significantly contributing to the problem.

The Prime Minister and the Chancellor claimed at the Budget to have a plan for growth. Is it not the case that the cuts will not help growth in this country, but will achieve the opposite by reducing production and GDP to make the economy worse off, not better? Time and again, this Conservative Government have shown a complete lack of support for the manufacturing sector in this country. We saw it with Bombardier, we saw it with Sheffield Forgemasters, and now we are seeing it with BAE Systems. I promise you, Mr Deputy Speaker, that Britain will not recover from the global economic crisis without a strong manufacturing base.

We know that the cuts are going too far and too fast. We know that there are problems in the eurozone that Governments are grappling with. Those problems will make us much more likely to go into recession. The measures that the Government are taking in cutting the defence budget are also causing problems in keeping the economy moving. When are the Government going to realise that and start providing the support that the manufacturing industry in this country is crying out for?

I thank the hon. Member for Preston (Mark Hendrick) for being generous in allowing me to take some time in an important debate for all our constituencies. Your constituency, Mr Deputy Speaker, and mine share a plant. I have the proud home of BAE Systems in Warton and you have Samlesbury. We do not need to think too long and hard to know how important those jobs and those plants are. We also know how devastating such job losses are for local communities.

I want to use this debate to remind the House of what the Government are doing and to focus on what is still to be done. The Government are supporting Typhoon exports in a way that no Government have in recent history. There are some positive stories and some potential contracts that could come home.

I ask all Members, and particularly the hon. Member for Fylde (Mark Menzies), whether there will be a displacement of the RAF orders into the export orders. That is the big question.

The hon. Gentleman raises an important point. Some of the orders that were originally planned for the RAF could well be displaced into other orders. My main concern is ensuring that aircraft are being built. Who the end customer is is a secondary matter. I want aircraft to be built in my constituency, and I want its world-class work force to be employed.

We saw the world-class Typhoon aircraft coming of age in Libya. I would like to ensure that systems such as the E-Scan radar are fully available for export orders should the customer require them. On the Typhoon, I know that the Government have given a commitment to tranche 3 upgrades. It is important that those come through in a timely manner so that BAE Systems can manage the work flow. On the unmanned aerial combat vehicle programme, the Government have signed a memorandum of understanding with France. That is hugely important, but we must get it moving quickly so that BAE Systems can plan the workload and allocate people across the programmes.

Let us not forget that BAE Systems is an incredibly profitable private global defence company. It has made more than £1 billion of profit this year. Therefore, this issue is not just about what the Government are doing; it is about ensuring that BAE Systems is doing everything necessary. I would like to sound one note of caution. When BAE Systems is entering into work-share agreements for global deals, it must ensure that it always acts in the interest of the work force, not just in the interests of the shareholders. We must ensure that work that could be done in the UK is done in the UK, as opposed to being exported to other countries. I want BAE Systems to stop and think about that, because it has a commitment to Lancashire and to UK plc.

Finally, I welcome the enterprise zones that have been identified for Warton and Samlesbury. They can be much more than a sticking plaster. In a meeting that I had with the Prime Minister at the Conservative party conference, we got the commitment that UKTI would be fully engaged to ensure that those are not just glorified business parks, but that they attract the very best the world can offer. Yes, there is a tough economic climate, but we have to be ambitious for Lancashire because its people deserve no less. We have a world-class work force who have the full range of skills. We have to go out and sell those sites and that work force—I call on the Minister to help us in this—so that when people invest in the months and years to come, they offer jobs and a future that we can be proud of.

I congratulate the hon. Member for Preston (Mark Hendrick) on securing this debate on an important issue that affects his constituents and those of other Members who are in their places, both in Lancashire and across the border at Brough. Of course, it also affects your constituency, Mr Deputy Speaker.

I appreciate that. The Minister will be aware that some of the work going to Samlesbury and Warton is going from the East Riding. Is he also aware that the view of workers at Warton and Samlesbury is that they do not have the capability or capacity to deal with the Hawk? There is suspicion that the Hawk will eventually be built abroad. He will know that I, the right hon. Member for Haltemprice and Howden (Mr Davis) and all other local MPs are determined to stop the closure of a plant that has manufactured aerospace equipment for 100 years. Will he agree to consider imaginative proposals, which may include the civil aerospace industry, to keep that manufacturing plant open?

I do not want to get ahead of myself on the broader issues, and I will come in a moment to the fact that we are in a 90-day consultation process and the company has to demonstrate a business case. The right hon. Gentleman and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) have made it very clear—rightly so, in my view—that the company has to make that case. I have said that to the work force, and I say it to Members throughout the House. Members, particularly those with the experience that the right hon. Gentleman has, are well placed to challenge that business case. The Government need to ensure that we strike a balance so that we are ready to act if, at the end of the 90 days, it turns out that we have the problems that he has described. I will not get drawn into the pros and cons now, because I will want to see the business case, as will the Secretary of State.

Before I was interrupted on that important point, I was about to put on record the fact that I want to extend my sympathy to all those affected by the announcement. The Government recognise, and I recognise, the human cost involved in such cuts, and how they affect individuals, families and communities. I fully recognise that BAE Systems is, as the hon. Member for Preston pointed out, one of the largest employers in Lancashire. I am acutely aware of the depth of the local impact that will affect many people.

I wish to address a number of issues that have been raised. First, the hon. Gentleman referred in his opening remarks to a letter that he had written to the Secretary of State. I have asked my officials to check, and we have no record of receiving such a letter on BAE. We have a record of a letter about supermarkets dated 4 October, but I assume that is not the one. Perhaps at the end of the debate he could give me a copy of the letter so that I can ensure that it goes to the Secretary of State.

There was quite a lot of party political discussion from the hon. Gentleman, implying that the Government have no interest in the manufacturing industry. I strongly refute that. He did not mention the changes to the tax law to ensure capital allowances, the improved investment in the manufacturing advisory service or the changes that we are making through the advanced manufacturing technology and innovation centre, alongside the other work we are doing on aerospace. I hope that we can get the party political banter out of the way and focus on the issue that affects his constituents, but I think he will understand that I am not prepared to ignore remarks suggesting that the Government do not take manufacturing seriously. We do, and I do.

I now turn to the causes of the problem, and some of the things that the Government intend to do and are already acting on. The company has advised us that the problem was caused principally by changes in key international programmes and the need to remain globally competitive at a time when defence spending in many nations is under huge pressure. We are all well aware that public finances are tight, and defence budgets are not immune. I think even the Opposition Front Benchers understand that. Although a decision of this nature is a commercial issue for the company, it is therefore absolutely right that the Government should do all they can to help those affected.

I have talked in the past few weeks to Members—including you, Mr Deputy Speaker, in your role representing your constituents—and they have all understood those concerns. I also had the opportunity to meet workers while I was in Manchester. I re-emphasise that I understand that during the 90-day consultation process, Members and workers will wish to challenge the business case, and rightly so. We will see what the outcome of that is. However, we must ensure that the Government have a plan in place if those redundancies are made, and I should like to set out the practical help available to hon. Members’ constituents.

The first step is to ensure that the Jobcentre Plus rapid response service is available. It has already offered access to Next Step one-to-one careers advice, which complements the support available from the company. I know from dealing with previous cases how valuable that practical help can be to individuals.

Secondly, and more broadly—this important question was raised by the hon. Member for Preston and my hon. Friend the Member for Fylde (Mark Menzies)—how do we ensure that our country does not lose those skills for good? That consideration is why, back in January, the Secretary of State and I established the talent retention team. The intention is that Government and industry ensure that we do not lose those key specialisms, whether in BAE or elsewhere. The team matches the skilled employees who are facing redundancy to vacancies in other companies. I can tell the House that so far, 200 UK companies have registered. Those who have signed up and are recruiting include Rolls-Royce, Siemens, Nissan and Airbus. I understand that several thousand jobs will be listed in the next month.

Although I appreciate that taking one of those jobs is not a straightforward decision—it might involve commuting or relocation—that system is important, because it will help us to avoid losing those key design, engineering and manufacturing jobs, which are important whether they are in Kingston upon Hull West and Hessle or in Lancashire, which is the subject of this debate.

The third question, which is just as important, is how we help local economies. On this subject, the Chancellor listened carefully, in particular to my hon. Friend the Member for Fylde, who argued that there needed to be a kick-start for the locality in addition to help for individuals. That is why last month the Government responded positively by inviting both the Lancashire and the Humber local enterprise partnerships to submit proposals for two new enterprise zones. They are important, because they provide real advantages for areas such as Warton and Salmesbury—and Brough, if I may stretch the geography of Lancashire temporarily.

I will get to E-Scan in a moment.

The business rate discount, the retention of the money for a 25-year period, the radical simplification of the planning system and the support to ensure superfast broadband are crucial to enterprise zones, but there are a couple of aspects of LEPs that I often feel are lost in some of the coverage—the use of tax increment finance to ensure the long-term viability of the zone, and the UKTI support for inward investment and trade opportunities. Given the civil and military nature of aerospace, we are looking to talk to both the Lancashire LEP and the Humber and Hull LEP about those two enhancement aspects, to see whether they can be a core part of the offer.

One hon. Member asked a question on Typhoon. The four Typhoon partner nations have decided to extend the programme, so that both domestic and export orders can be dealt with in a way that means we can sustain capacity. That means that the programme’s production has slowed; it has not been stopped. Clearly, we must agree that with all partner nations, because it is a partnership project.

On E-Scan radar, the point is that the Ministry of Defence and the industry are working on an assessment programme. Electronically scanned radar is on-the-edge technology. If we get this right, it will be Europe’s first and only second generation scanned radar. Therefore, we need to think about how it works. The reason why we are not committing on long-term development is that we need to see whether the assessment works in the first place. In my book, that is a sensible pattern to follow. Clearly, we would not have taken that first step had we not seen the opportunity. That is an important leap in capability for the Typhoon, and it could well mean that although there will be tighter pressure on the domestic Typhoon programme, there will be opportunities for better exports in the long term.

Let me now bring my remarks to a close. I want to assure Members and their constituents that the Government are determined to take all the necessary action both to support individuals and to ensure that the UK’s defence and manufacturing base can prosper over the long term.

Question put and agreed to.

House adjourned.