Train-building Industry

Heather Wheeler Excerpts

Tuesday 12th July 2011 Westminster Hall

[Margaret Beckett (Derby South) (Lab)]

I congratulate the hon. Member for Amber Valley (Nigel Mills) not only on securing the debate, but on his excellent speech. In fact, my only criticism would be that he has left the rest of us with not very much to say. He has, effectively and well, used all the ammunition. Significantly, I think I am right in saying that—perhaps not so unusually in this Chamber, but unusually in this place in general—almost every hon. Member present is not here to attack or disagree. We are all here for the same purpose: to raise the concerns so ably set out a moment ago by the hon. Gentleman. If the Minister’s Department and her ministerial colleagues were nurturing the illusion that this is a decision that would go away, that might be an error.

Cross-party interest in this issue has been clear this morning. All the Derby Members here—perhaps almost every hon. Member, as the hon. Member for Broxtowe (Anna Soubry) indicated—have constituents with considerable expertise in the rail industry. The plant in Derby is in my constituency, but we all know from our own constituents, wherever they may live, of the very real astonishment among rail industry aficionados. The people who know and understand, who have experience and expertise, are at a loss to understand and explain the decision, and the hon. Gentleman is entirely right to ask for an explanation.

The hon. Gentleman talked about the weight given to the different elements in the procurement process. Like him, I have seen the references that have been made—I believe that the Secretary of State for Business, Innovation and Skills made one of them. There was a story in the Daily Express over the weekend suggesting that this was a decision based on finance, rather than on the kind of trains in which, as the hon. Gentleman rightly identified, our constituents will be travelling for many a year to come. He identified the fact that in the original procurement process in 2008, the Department reserved the right to hold a funding competition. My understanding is that there were two further opportunities—in March 2010 and January 2011, when further steps were taken in the bidding process—when the Department could have triggered the right, which it had reserved, to look again and separately at the issue of funding, but it chose not to do so. That is a concern to all of us.

The hon. Gentleman asked whether we are looking for a train builder or a bank. As I understand it, Siemens has actually become a bank, which indicates the strength of its balance sheet, but is that what we are looking for? Certainly not, if we are talking about whether there is a future for the train-building industry in this country.

[Heather Wheeler (South Derbyshire) (Con)]

I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing the debate. We are talking about the future of train building in this country. The decision to make Siemens the preferred bidder is incredibly disappointing for all our constituents who work at Bombardier, but surely the most important thing is the way forward. The chairman of Bombardier is going out to South Africa with the Government to look at securing contracts out there. It is asking the Government to bring forward tube contracts by a couple of years, so that there is a future for train building in this country, and the college is opening up in Derby for rail contracts. We have great expertise in the area, and in the north-west too. That is where we need to go with this conversation. I am sure that, having heard my hon. Friend’s conversation with the Minister, answers will be given, but we want to talk about the future, and the future will be train building in this country.

[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.

--- Later in debate ---

[Maria Eagle (Garston and Halewood) (Lab)]

I congratulate the hon. Member for Amber Valley (Nigel Mills) on securing the debate. He will have noticed not only that everyone has congratulated him on that and on the way in which he made his remarks, but the great agreement among all the speakers.

If rail were in decline in the UK, the loss of our rail manufacturing industry would be a tragedy, but it would at least be understandable. We have seen industries decline because of technological or social change, but in the case of rail, there is no excuse for letting the industry wither and die in Britain. In fact, the reverse is true. Rail is thriving in the UK. More people are travelling now than at any point since the 1920s—1.3 billion journeys are now made every year. There has been growth of an additional 1 million journeys in the past five years alone. Every prediction suggests that demand is continuing to increase and that it could double in the next 30 years. Rail is therefore a priority for investment for the foreseeable future.

The Minister and I may have our differences over spending, not least on the speed and scale of cuts, but there is consensus that as a country we will be investing in rail for many years. Whether the investment is in track and signalling, stations or trains, we will be spending billions of pounds in the years to come. That investment should benefit the UK economy. It will lead to faster journey times and additional capacity. Why cannot it also lead to our supporting, improving and growing our manufacturing industry, instead of our watching it leave the country? It could lead to significant increases in the numbers of manufacturing jobs, which it has done in the past decade.

Sadly, Bombardier is the last train manufacturer left in the UK, but under the previous Government it won successive orders, including £3.4 billion-worth of London underground trains, as well as trains for the London Overground network, London Midland, Chiltern Railways and the Stansted Express. Therefore, the decision by the current Secretary of State for Transport to award the £1.4 billion Thameslink contract to the German-based Siemens-led consortium puts at risk 3,000 British jobs at Bombardier and very many more in the supply chain, as right hon. and hon. Members on both sides of the Chamber have said.

Our train manufacturing industry is at a crossroads. We can see it either follow other sectors and become yet another assembly line, or remain a major manufacturer, taking advantage of the significant investment and orders that the success of rail in the UK will guarantee for years to come. We can ensure that we carry on building trains in this country, but by awarding the Thameslink contract to a company that will build the trains abroad, the Government have given us their view of the future of rail manufacturing in the UK. Today, they have heard calls from right hon. and hon. Members on both sides of the Chamber, which I echo, for them to think again and be very clear that that is what they want in the future.

Siemens is a major British employer in its own right, with more than half its 16,000-strong UK work force involved in manufacturing and engineering. The contract that we are discussing will lead to jobs. There is a dispute about just how many, but there will be jobs in the supply of train components and in maintenance. Some will be substituted for jobs that Bombardier would have had if it had won the contract, while others will be new. I welcome the commitment of Siemens to a new UK rail training academy, supporting the national skills academy for railway engineering. However, none of that good takes away from the fact that the Thameslink trains will be built by a work force in Germany. The reality is that the jobs that will be created would have had to have been in the UK whatever the result of the procurement.

The decision is undoubtedly a body blow for Bombardier, as right hon. and hon. Members who represent constituencies in the immediate area, such as my right hon. Friend the Member for Derby South (Margaret Beckett) and my hon. Friend the Member for Derby North (Chris Williamson), have said. The fact that 446 permanent and 983 contract staff already face redundancy is a severe blow, not only to the east midlands but to the whole of our manufacturing industry. The Government have tried to suggest that those jobs would have been lost anyway, but that has been strongly denied by the company, which has said that not one permanent position would have been lost had it secured the contract.

The Government’s response so far to the uproar has been to wash their hands of the process and try to blame the previous Government. That might be understandable, but it does not take us very far forward. We have even seen the nonsense of the Transport Secretary writing to the Prime Minister to complain about the decision that he himself has made.

I hope the Minister today will come forward with some rather more constructive ways in which she can tackle the crisis that the decision has created. It is clear that the Department for Transport has not secured the most economically advantageous outcome either for the local community or for the country as a whole, despite it being perfectly permitted to do so. It is also clear that there has been a particular problem in the Department for Transport, which was referred to by right hon. and hon. Members on both sides of the Chamber, including the hon. Members for Amber Valley and for Mid Derbyshire (Pauline Latham). The DFT has awarded not a single contract to Bombardier since it has been in charge of letting them, yet Bombardier won more than 70% of orders for new trains for the UK rail industry when procurement was led by the rolling stock leasing and train operating companies. The company has been incredibly successful around the world—another point made by all who spoke in the debate—yet the DFT has not placed an order with a British-based company since it took over procurement. There is an issue to be addressed by the Minister and there are serious questions to be answered.

Opposition Members have called for a full independent review of the procurement. We are clear that the review must consider the social impact on the UK’s work force, both for those directly employed by Bombardier and for those in the wider supply chain. It must consider the likely impact on the sector as a whole and the impact on future procurement. Despite what Ministers say, the Government are perfectly entitled to do just that. The Secretary of State’s predecessor, Lord Adonis, commissioned an independent review of the entire intercity express programme after the preferred bidder had been announced, and the new Government carried out a further review following the election. Both reviews led to substantial changes to the project, not least the agreement that Hitachi would commit to Newton Aycliffe as the preferred site for its planned European rolling stock manufacturing and assembly centre, generating at least 500 new jobs in the north-east.

There are things that Ministers can do. As someone who was a Minister for nine years, I confirm that it is never the case that Ministers cannot do anything. Today, I urge the Minister to think again and agree to a review of the decision. Labour Members accept that we need to learn lessons from our own time in government. In view of the cross-party consensus among Back Benchers in today’s debate, I hope that we can reach a cross-party consensus on how rail procurement will be carried out in the future, particularly as these decisions inevitably cross Parliaments.

I shall offer three specific suggestions for a way forward. First, we need to consider how we operate these contracts under the European procurement directive—a point made by a number of right hon. and hon. Members. We must examine why France and Germany manage procurement whereby their home-based companies in almost all cases secure the work. Only in April this year, German national rail operator Deutsche Bahn placed a €5 billion order for 200 high-speed trains with Siemens. A major contract such as that being awarded to anyone but a domestically based company would be greeted with outrage and shock in Germany.

Secondly, we need to look at a longer-term capital investment programmes and not just stop-start, feast-and-famine programmes, as several Members have said. Manufacturers are left unable to plan ahead. Why must Bombardier have so many agency workers? It is nonsense for trains to be built by agency workers, when train building is such a skilled job. Those who build the trains should have training, a proper career path and guaranteed employment extending into the future, and they could have that if we organised our procurement better. The lack of certainty created by stop-start procurement hits investment in skills. Network Rail believes that a fifth of all procurement costs could be eliminated if there were continuity of orders. It is 800 days since the last new rolling stock order was placed. The feast-and-famine approach to rolling stock procurement, which has blighted the sector for almost 20 years, must change, and there is no reason why it cannot, given the investment in this country’s rail industry in the coming years.

Thirdly, we need to reduce the number of train designs to enable longer continuous orders, economies of scale and interoperability. Network Rail has recommended reducing the 64 different rolling stock classes that operate on the network to just three. The Competition Commission calculates the average cost per vehicle at more than £1 million, with 8% of procurement costs associated with the development of different bespoke models. Passenger rolling stock costs in Britain are 15% of the industry’s running costs. The three changes that I have outlined would make a significant difference to not only reducing that cost, but enabling British-based manufacturers to plan properly, skill their work forces adequately and secure the large, long-term, ongoing work that is achieved in sectors such as the defence industry.

In the meantime, the Government must not sit back helplessly as yet another UK manufacturing sector is lost. It is not too late to look again at the Thameslink decision. As my right hon. Friend the Member for Derby South, the hon. Member for Amber Valley and others have said, this is not a done deal. Siemens has been named as the preferred bidder, but the contract has not been signed. While that remains the case, there is still a chance to look at the issue again and to take some action.

Interestingly, the Minister for Housing and Local Government said in a written statement to the House on 16 June that Bombardier’s bid

“also presented an attractive proposal and it is our intention to retain them as the reserve bidder.”—[Official Report, 16 June 2011; Vol. 529, c. 86WS.]

If the proposal is attractive and would protect a large number of British jobs, it must surely be right for the Minister for Transport to have another look at whether the right decision has been taken.

I want to ask the Minister a number of questions. Will she confirm on precisely what date DFT Ministers were first informed of the result of the procurement? For what reason did she reject the option of holding a funding competition, which my right hon. Friend the Member for Derby South has mentioned? On a couple of occasions, that option could have been taken forward. Why was it not? Why, as late as the start of this year, were bidders, including Bombardier, asked to supply a range of new information if, as the Government have stated, the decision simply came down to a balance-sheet comparison? If that was the determining factor, it could have been done at an early stage in the procurement.

The Minister will be aware that Deutsche Bahn recently rejected the Siemens bogie design for the new generation of its high-speed trains and that it required the company to use the Bombardier FLEXX Eco instead. What consideration was given to that element of the contract? Will she take this opportunity to accept that it was wrong for her Department to brief the media that Bombardier would have made job losses regardless of the decision on the contract, because the company has firmly denied that claim?

[Heather Wheeler]

I do not know whether the hon. Lady has seen the letter involved, which was dated 23 May, but I have, and I am surprised that she has said what she has said.

[Maria Eagle]

The hon. Lady is entitled to her opinion. I am reflecting on what the company said publicly after the Government had made their claim, which it utterly denied.

Finally, will the Minister agree to look at the procurement process for Crossrail trains? That process is at an earlier stage than Thameslink was at when she inherited it. Will she look at Crossrail again, review the contract and the procurement process and bring forward a revised proposal that includes the lessons of Thameslink?

In addressing the Chamber at the end of this excellent debate, I hope the Minister answers the questions that have been put to her. Of course, she will not have time to answer them all, because there have been very many, but it would perfectly acceptable for her to write to us with detailed answers to the questions that she does not get around to answering.